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Deal or No Deal? Decision-making under Risk in a Large-payoff Game Show

Author

Listed:
  • Thierry Post
  • Guido Baltussen
  • Martijn van den Assem

    (Faculty of Economics, Erasmus Universiteit Rotterdam)

Abstract

We examine the risky choices of contestants in the popular TV game show “Deal or No Deal” and related classroom experiments. Contrary to the traditional view of expected utility theory, the choices can be explained in large part by previous outcomes experienced during the game. Risk aversion decreases after earlier expectations have been shattered by unfavorable outcomes or surpassed by favorable outcomes. Our results point to reference-dependent choice theories such as prospect theory, and suggest that path-dependence is relevant, even when the choice problems are simple and well defined, and when large real monetary amounts are at stake. This discussion paper has resulted in a publication in the American Economic Review , 2008, 9(1), 38-71.

Suggested Citation

  • Thierry Post & Guido Baltussen & Martijn van den Assem, 2006. "Deal or No Deal? Decision-making under Risk in a Large-payoff Game Show," Tinbergen Institute Discussion Papers 06-009/2, Tinbergen Institute, revised 02 Feb 2006.
    • Handle: RePEc:tin:wpaper:20060009
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    Citations

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    Cited by:

    1. Cary Deck & Jungmin Lee & Javier Reyes, 2008. "Risk attitudes in large stake gambles: evidence from a game show," Applied Economics, Taylor & Francis Journals, vol. 40(1), pages 41-52.
    2. Sjögren Lindquist, Gabriella & Säve-Söderbergh, Jenny, 2006. "Testing the rationality assumption using a design difference in the TV game show 'Jeopardy'," Working Paper Series 9/2006, Stockholm University, Swedish Institute for Social Research.
    3. Nicolas de Roos & Yianis Sarafidis, 2010. "Decision making under risk in Deal or No Deal," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(6), pages 987-1027.
    4. Gee, C., 2007. "Risky Choice and Type-Uncertainty in "Deal or No Deal?"," Cambridge Working Papers in Economics 0758, Faculty of Economics, University of Cambridge.

    More about this item

    Keywords

    Decision making under risk; Relative risk aversion; break-even effect; real incentives; game show;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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