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My money or yours: house money payment effects

Published online by Cambridge University Press:  14 March 2025

Larry R. Davis ,
B. Patrick Joyce  and
Matthew R. Roelofs
Larry R. Davis*
Affiliation:
School of Business and Economics, Michigan Technological University, Houghton, MI 49931, USA
B. Patrick Joyce*
Affiliation:
School of Business and Economics, Michigan Technological University, Houghton, MI 49931, USA
Matthew R. Roelofs*
Affiliation:
Department of Economics, College of Business and Economics, Western Washington University, Bellingham, WA 98225, USA
*
e-mail: lrdavis@mtu.edu
e-mail: pjoyce@mtu.edu
e-mail: matthew.roelofs@wwu.edu
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Abstract

This paper reports the results of an experiment designed to study how subjects’ decision making may be affected by the timing of participation payments (or show-up fees). The experiment follows Davis et al. (J. Econ. 30:69-95, 2004) where subjects were asked to make a sequential purchase decision and were given the opportunity to purchase information about the value of a good prior to a decision to purchase the good itself. There, subjects purchased information less often than expected which was interpreted as risk-seeking behavior. Here, we test a payment hypothesis by varying the timing of the participation payment. Payment of a show-up fee before the decision-making stages of the experiment increases information purchase, which we interpret as an increase in risk-averse behavior.

Keywords

Payment timingInformationDecision uncertaintyShow-up feeParticipation payment

JEL classification

C91: Laboratory, Individual Behavior D80: General B40: General
Type
Research Article
Information
Experimental Economics , Volume 13 , Issue 2 , June 2010 , pp. 189 - 205
Copyright
Copyright © Economic Science Association 2010

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Footnotes

Electronic supplementary material The online version of this article (doi: 10.1007/s10683-010-9235-7) contains supplementary material, which is available to authorized users.

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