Do casinos pay their customers to become riskaver

Authors: Maximilian Rüdisser Raphael Flepp Egon Franck

Publish Date: 2016/12/31

Volume: 20, Issue: 3, Pages: 736-754

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Abstract

The house money effect predicts that individuals show increased riskseeking behavior in the presence of prior windfall gains Although the effect’s existence is widely accepted experimental studies that compare individuals’ risktaking behavior using house money to individuals’ risktaking behavior using their own money produce contradictory results This experimental field study analyzes the gambling behavior of 917 casino customers who face real losses We find that customers who received free play at the entrance showed not higher but significantly lower levels of risktaking behavior during their casino visit expressed through lower average wagers This study thus provides field evidence against the house money effect Moreover as a result of lower levels of risk seeking endowed customers yield better economic results in the form of smaller ownmoney losses when leaving the casino

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