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Not All Income is the Same to Everyone: Cognitive Ability and the House Money Effect in Public Goods Games

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  • Hackinger, Julian

Abstract

The provision of public goods often suffers from a social dilemma generating too little contributions. Yet, it remains an open question how positive contributions materialise. Existing studies suggest that individuals' decisions on how much to contribute depend on cognitive skills. Furthermore, mental accounting research indicates that the source of income matters for economic decision making. I show experimentally that subjects' contributions in a one-shot linear public goods game depend on an interplay of the two factors. While a house money effect exists for subjects with low cognitive skills there is no such effect for those with high cognitive skills. My findings have important implications for taxation, redistribution, and voting behaviour, as well as past and future experiments.

Suggested Citation

  • Hackinger, Julian, 2016. "Not All Income is the Same to Everyone: Cognitive Ability and the House Money Effect in Public Goods Games," MPRA Paper 70836, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:70836
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    References listed on IDEAS

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    Cited by:

    1. Abilio Henrique Berticelli de Freitas, 2022. "An Analysis on the Experimental Design of “My Money or Yours: House Money Payment Effects"," Journal of Economics and Behavioral Studies, AMH International, vol. 14(3), pages 51-57.

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    More about this item

    Keywords

    Public Goods; Experiment; Cognitive Skills; House Money Effect; Mental Accounting; Endowment Source;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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