Easy Money, Cheap Talk, or Peeling Spuds

Last registered on April 11, 2023

Pre-Trial

Trial Information

General Information

Title
Easy Money, Cheap Talk, or Peeling Spuds
RCT ID
AEARCTR-0004149
Initial registration date
April 28, 2019

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
April 29, 2019, 11:00 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated
April 11, 2023, 2:14 AM EDT

Last updated is the most recent time when changes to the trial's registration were published.

Locations

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Primary Investigator

Affiliation
UiB

Other Primary Investigator(s)

PI Affiliation
UC Berkeley

Additional Trial Information

Status
On going
Start date
2023-04-06
End date
2024-06-30
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
The proverb "easy come, easy go" tells us that the regret from losing something depends
upon how hard we worked to get it. Normative economic theory assumes, however, that
liquid wealth is fungible irrespective of its source; how a dollar is obtained should not affect
what we buy with that dollar or the risk we are willing to take investing that dollar. Thaler and
Johnson (1990) dispute that claim with a series of experiments demonstrating that people
make different choices with money that has been easily or unexpectedly obtained. Thaler
argues that people behave as if income and expenses are assigned to separate mental
accounts with limited fungibility between accounts (Thaler 1999; Shefrin and Thaler 1988).
Money easily gained is likely to end up in a mental account from which money is easily spent
and readily wagered. Hard earned money is likely to land in a mental account from which
money is more carefully spend and less readily wagered. For most people, most money is of
the earned variety.
In economics laboratory experiments, participants are typically given an endowment
equivalent to a couple of hours’ wages. Such endowments encourage participants to pay
attention, exert more effort, and try to make choices that lead to higher earnings within the
design of the experiment. However, Thaler and Johnson (1990) argue that when people lose
money they consider to be a windfall gain, the loss is likely to be coded as a reduction in the
gain which “doesn’t hurt as much as losing one’s own cash” (p. 657). Thus laboratory
participants who mentally code money given to them in a laboratory as a windfall gain,
distinct and separate from their earned income and savings, may display much less risk
aversion in the laboratory than they do in their daily lives.
Our purpose is to demonstrate that in an experimental laboratory setting subjects asked to
make risky choices take more risk with money they were given by the experimenter than
money they earned. These differences in risk taking are dramatic and raise questions about
inferences drawn from prior risk taking experiments with endowed money.
External Link(s)

Registration Citation

Citation
Hvide, Hans and Terrance Odean. 2023. "Easy Money, Cheap Talk, or Peeling Spuds." AEA RCT Registry. April 11. https://doi.org/10.1257/rct.4149-1.2
Former Citation
Hvide, Hans and Terrance Odean. 2023. "Easy Money, Cheap Talk, or Peeling Spuds." AEA RCT Registry. April 11. https://www.socialscienceregistry.org/trials/4149/history/176258
Experimental Details

Interventions

Intervention(s)
We divide participants into two groups: those that obtain an endowment through a windfall and those that obtain the same amount through completing a physical effort task (the ”hard-earned” group). We test whether individuals in the hard-earned group make less risky and more patient choices than individuals in the windfall group.

Please note that the experiment is a follow-up on a previously run experiment (and disseminated as a working paper) by Hvide and Lee. For the risk task we follow Holt & Laury (2002).

Subjects in the XLab subject pool at UC Berkeley are invited to participate on a first-come-first-serve basis. There are no other inclusion/exclusion criteria used. We plan to run approximately 10 sessions, with approximately 20 subjects per session each, for a total of 200 subjects.

Subjects from the XLab subject pool are invited via email by XLab staff to participate in one single session, with no follow-up sessions. The experiment should take less than one hour to complete per session. Data collection is through a computer.
Intervention Start Date
2023-06-30
Intervention End Date
2024-06-30

Primary Outcomes

Primary Outcomes (end points)
Risk choices
Primary Outcomes (explanation)
Risk preferences. Method described in our previous working paper.

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
We divide participants into two groups: those that obtain an endowment through a windfall and those that obtain
the same amount through completing a physical effort task (peeling potatoes). In the current experiment the control ("windfall") group will have a settling in period of about 10 minutes. Apart from that all the details are the same as in the initial experiment
Experimental Design Details
Not available
Randomization Method
By a computer.
Randomization Unit
Individuals
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
About 100 individuals in each group, 200 in total
Sample size: planned number of observations
About 100 individuals in each group, 200 in total
Sample size (or number of clusters) by treatment arms
About 100 individuals in each group, 200 in total
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Not calculated.
IRB

Institutional Review Boards (IRBs)

IRB Name
UC Berkeley Committee for the Protection of Human Subjects
IRB Approval Date
2020-10-26
IRB Approval Number
2020-09-13681