House money effect

Description

Tendency for people to make decisions dependent on the prior gain or loss; includes greater tendency to gamble with recently won money.

Task

In a first phase, participants perform a task in which they are asked to find the exception in a set of five words and then indicate the confidence in their response using a 5-point scale. Later in the test, participants receive feedback on the accuracy of each response and are asked to recall their initial confidence judgment.

Items (1)

The following item is used:

1. You have just received an unexpected 3,000 kn. Choose one of the two options offered:

(a) 50% chance to earn 900 kn and a 50% chance to lose 900 kn
(b) I do not want further gains or losses

2. You've just lost 3,000 kn. Choose one of the two options offered:

(a) 50% chance to earn 900 kn and a 50% chance to lose 900 kn
(b) I do not want further gains or losses

Scoring

Participants who gave response "a" to question 1 and response "b" to question 2 are coded as biased.

Sources

Mušura Gabor, A. & Gamulin, L. (2016). Breaking the myth about rational investor: Investors' susceptibility to heuristical and biased reasoning. Review of psychology, 23(1-2), 15-25.