House-Money Effect

We treat recently won money differently from money we earned through effort — taking risks with 'house money' that we would never take with our own savings.

• Gamblers who win at the start of a night bet increasingly recklessly, treating their winnings as 'free money' that doesn't really count.
• Investors who experience windfall gains in a bull market take disproportionate risks with those gains compared to their base capital.
• Employees who receive unexpected bonuses spend them on luxuries; salary increases of the same amount tend to go into savings.