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Revisiting the house money effect in the field: Evidence from casino jackpots


Flepp, Raphael; Rüdisser, Maximilian Valentin (2019). Revisiting the house money effect in the field: Evidence from casino jackpots. Economics Letters, 181:146-148.

Abstract

This paper tests the house money effect, i.e., that prior gains increase subsequent risk-taking behavior, in the field. We use individual-level slot machine gambling records of 5,169 players from a real casino and employ jackpot hits as exogenous house money shocks. Our results show that players wager significantly less money after hitting a jackpot, which implies that players reduce their risk-taking behavior and thus act more cautiously after experiencing gains. We fail to replicate the house money effect in the field and find evidence for a reverse house money effect. Furthermore, while risk-taking behavior is reduced after hitting a jackpot, the jackpot size has no additional effect.

Abstract

This paper tests the house money effect, i.e., that prior gains increase subsequent risk-taking behavior, in the field. We use individual-level slot machine gambling records of 5,169 players from a real casino and employ jackpot hits as exogenous house money shocks. Our results show that players wager significantly less money after hitting a jackpot, which implies that players reduce their risk-taking behavior and thus act more cautiously after experiencing gains. We fail to replicate the house money effect in the field and find evidence for a reverse house money effect. Furthermore, while risk-taking behavior is reduced after hitting a jackpot, the jackpot size has no additional effect.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Language:English
Date:2019
Deposited On:29 May 2019 11:50
Last Modified:29 May 2019 11:50
Publisher:Elsevier
ISSN:0165-1765
OA Status:Closed
Publisher DOI:https://doi.org/10.1016/j.econlet.2019.05.026
Other Identification Number:merlin-id:17814

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