Experimental Analysis Of The House-Money Effect In A Public Goods Environment

Experiments in economics usually begin with an initial endowment to subjects. Essentially, subjects are given starting capital to be used in the games conducted by the experimenter. While this practice is necessary to conduct the experiment, it could potentially affect the decisions of the subjects as there is no risk of suffering any net monetary loss. This phenomenon is known as the house-money effect. Since the original discovery, the house-money effect has been studied in different contexts and settings. The results from these experiments have varied. This study serves as a robustness check on past research conducted on the house-money effect.The experiment was conducted with 69 student subjects in two treatment groups. Thirty-six subjects participated in the house treatment where subjects were credit money in their experimental accounts upon arrival at the public goods experiment (standard protocol in experimental economics). Thirty-three subjects participated in the advance treatment where subjects were given money prior to arriving at the public goods experiment. Additionally, subjects in each treatment participated in two sessions spread across three weeks. In conclusion, the study does not find strong statistical evidence of a house-money effect within the public goods environment.