DOI: 10.1287/mnsc.36.6.643. Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice [Penn]

Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice

10.1287/mnsc.36.6.643

Crossref journal-article

Institute for Operations Research and the Management Sciences (INFORMS)

Management Science (109)

Abstract

How is risk-taking affected by prior gains and losses? While normative theory implores decision makers to only consider incremental outcomes, real decision makers are influenced by prior outcomes. We first consider how prior outcomes are combined with the potential payoffs offered by current choices. We propose an editing rule to describe how decision makers frame such problems. We also present data from real money experiments supporting a “house money effect” (increased risk seeking in the presence of a prior gain) and “break-even effects” (in the presence of prior losses, outcomes which offer a chance to break even are especially attractive).

Bibliography

Thaler, R. H., & Johnson, E. J. (1990). Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice. Management Science, 36(6), 643â660.

Authors 2

Richard H. Thaler (first)
Eric J. Johnson (additional)

References 0 Referenced 1,636

None

Dates

Type	When
Created	16 years, 9 months ago (Nov. 8, 2008, 9:58 a.m.)
Deposited	2 years, 5 months ago (April 2, 2023, 3:43 p.m.)
Indexed	8 hours, 34 minutes ago (Sept. 3, 2025, 6:09 a.m.)
Issued	35 years, 3 months ago (June 1, 1990)
Published	35 years, 3 months ago (June 1, 1990)
Published Print	35 years, 3 months ago (June 1, 1990)

Funders 0

None

BibTeX

@article{Thaler_1990, title={Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice}, volume={36}, ISSN={1526-5501}, url={http://dx.doi.org/10.1287/mnsc.36.6.643}, DOI={10.1287/mnsc.36.6.643}, number={6}, journal={Management Science}, publisher={Institute for Operations Research and the Management Sciences (INFORMS)}, author={Thaler, Richard H. and Johnson, Eric J.}, year={1990}, month=jun, pages={643–660} }

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