Darden's Luckiest Student: Lessons from a High-Stakes Risk Experiment

This paper reports on two high-stakes events in which a randomly selected “luckiest” student received the opportunity to participate in a lottery consisting of equally likely outcomes of zero and the cash equivalent to one semester of tuition. The major purpose of the events was to provide students and the larger community an opportunity to experience an event that was both significant in magnitude and undeniably random. A second purpose was to study the choice behavior of individuals facing lotteries involving stakes that, to our knowledge, were higher than any used in prior laboratory experiments. Prior to the selection of the luckiest student, all students were asked to declare the price at which they would choose the fixed dollar offer over the lottery. We studied how these reported prices changed when payoffs were hypothetical versus real and how students came up with their prices. With the second event, we conducted a full-factorial experiment that measured the effects of three factors identified during the first event (e.g., whether they were a buyer or seller). Our descriptions here of the formal and informal lessons from these events will be of interest to those involved in educational programs and in behavioral research related to decision analysis.