Why are gainers more risk seeking
The phenomenon that prior gains may increase people's willingness to accept risky gambles is named as the "house money effect" (Thaler and Johnson, 1990). Many studies have shown that the "house money effect" is a robust phenomenon but few scholars explain the mechanism of i...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Cambridge University Press
2013-03-01
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| Series: | Judgment and Decision Making |
| Subjects: | |
| Online Access: | http://journal.sjdm.org/12/12502/jdm12502.pdf |
| _version_ | 1797717633170145280 |
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| author | Jiaxi Peng Danmin Miao Wei Xiao |
| author_facet | Jiaxi Peng Danmin Miao Wei Xiao |
| author_sort | Jiaxi Peng |
| collection | DOAJ |
| description | The phenomenon that prior gains may increase people's willingness to accept risky gambles is named as the "house money effect" (Thaler and Johnson, 1990). Many studies have shown that the "house money effect" is a robust phenomenon but few scholars explain the mechanism of it well. We suppose the reason for the house money effect is that the ante (starting amount) is from the prior gambling profits, and its potential loss has relatively low psychological value. To test this hypothesis, we designed a series of studies using two-stage gambles. A total of 915 university students participated. In Study 1, in addition to a standard condition (which replicated the basic effect), we test how people respond to ``prospect theory, with memory'' frame, a ``concreteness'' frame and ``quasi-hedonic'' editing. None of these types of frames result in a significant house money effect. In Study 2, we certify the reference point shift to 100 Yuan in the second-stage gamble, thus the house money effect can be regarded as the absence of loss aversion; Study 3, consisting of 3 sub-experiments, indicated that gambling profits and normal income will open different mental accounts which are spent quite differently. The pain of losing 100 Yuan allowance is more serious than that of losing 100 Yuan gambling wins. People will typically reject the gamble of 50/50 chance to gain or lose 100 Yuan if the ante is from the ``normal income account'', but accept if the ante is from the ``windfall account''. The results of the series of experiments prove the accuracy of our hypothesis mostly. |
| first_indexed | 2024-03-12T08:39:06Z |
| format | Article |
| id | doaj.art-ba0d129403cd4a9e808aeca0e17a08a8 |
| institution | Directory Open Access Journal |
| issn | 1930-2975 |
| language | English |
| last_indexed | 2024-03-12T08:39:06Z |
| publishDate | 2013-03-01 |
| publisher | Cambridge University Press |
| record_format | Article |
| series | Judgment and Decision Making |
| spelling | doaj.art-ba0d129403cd4a9e808aeca0e17a08a82023-09-02T17:01:07ZengCambridge University PressJudgment and Decision Making1930-29752013-03-0182150160Why are gainers more risk seekingJiaxi PengDanmin MiaoWei XiaoThe phenomenon that prior gains may increase people's willingness to accept risky gambles is named as the "house money effect" (Thaler and Johnson, 1990). Many studies have shown that the "house money effect" is a robust phenomenon but few scholars explain the mechanism of it well. We suppose the reason for the house money effect is that the ante (starting amount) is from the prior gambling profits, and its potential loss has relatively low psychological value. To test this hypothesis, we designed a series of studies using two-stage gambles. A total of 915 university students participated. In Study 1, in addition to a standard condition (which replicated the basic effect), we test how people respond to ``prospect theory, with memory'' frame, a ``concreteness'' frame and ``quasi-hedonic'' editing. None of these types of frames result in a significant house money effect. In Study 2, we certify the reference point shift to 100 Yuan in the second-stage gamble, thus the house money effect can be regarded as the absence of loss aversion; Study 3, consisting of 3 sub-experiments, indicated that gambling profits and normal income will open different mental accounts which are spent quite differently. The pain of losing 100 Yuan allowance is more serious than that of losing 100 Yuan gambling wins. People will typically reject the gamble of 50/50 chance to gain or lose 100 Yuan if the ante is from the ``normal income account'', but accept if the ante is from the ``windfall account''. The results of the series of experiments prove the accuracy of our hypothesis mostly.http://journal.sjdm.org/12/12502/jdm12502.pdfThe house money effectTwo-stage gamblesmental accountingwindfall.NAKeywords |
| spellingShingle | Jiaxi Peng Danmin Miao Wei Xiao Why are gainers more risk seeking Judgment and Decision Making The house money effect Two-stage gambles mental accounting windfall.NAKeywords |
| title | Why are gainers more risk seeking |
| title_full | Why are gainers more risk seeking |
| title_fullStr | Why are gainers more risk seeking |
| title_full_unstemmed | Why are gainers more risk seeking |
| title_short | Why are gainers more risk seeking |
| title_sort | why are gainers more risk seeking |
| topic | The house money effect Two-stage gambles mental accounting windfall.NAKeywords |
| url | http://journal.sjdm.org/12/12502/jdm12502.pdf |
| work_keys_str_mv | AT jiaxipeng whyaregainersmoreriskseeking AT danminmiao whyaregainersmoreriskseeking AT weixiao whyaregainersmoreriskseeking |