Estimation of the House Money Effect Using Hurdle Models

Engel, Christoph; Moffat, Peter G.

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Estimation of the House Money Effect Using Hurdle Models

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Engel, Christoph
Max Planck Institute for Research on Collective Goods, Max Planck Society;

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http://www.coll.mpg.de/pdf_dat/2012_13online.pdf
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Engel, C., & Moffat, P. G. (2012). Estimation of the House Money Effect Using Hurdle Models.

Cite as: https://hdl.handle.net/11858/00-001M-0000-0028-6DD0-0

Abstract

Evidence from an experiment investigating the “house money effect” in the context of a public goods game is reconsidered. Analysis is performed within the framework of the panel hurdle model, in which subjects are assumed to be one of two types: free-riders, and potential contributors. The effect of house money is seen to be significant in the first hurdle: specifically, house money makes a subject more likely to be a potential contributor. Hence we find that the effect of house money is more than just an effect on behaviour; it has the effect of changing a subject from one type to another. This result is potentially important in the external validity debate.