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Deal or No Deal? Decision Making under Risk in a Large-Payoff Game Show

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Author Info
Thierry Post
Martijn J. van den Assem
Guido Baltussen
Richard H. Thaler

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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. (JEL D81)

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File URL: http://hdl.handle.net/10.1257/aer.98.1.38
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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 98 (2008)
Issue (Month): 1 (March)
Pages: 38-71
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Handle: RePEc:aea:aecrev:v:98:y:2008:i:1:p:38-71

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  1. Egil Matsen & Bjarne Strøm, 2006. "Joker: Choice in a simple game with large stakes," Working Paper Series 8307, Department of Economics, Norwegian University of Science and Technology. [Downloadable!]
    Other versions:
  2. 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. [Downloadable!]
  3. Cary Deck & Harris Schlesinger, 2008. "Exploring Higher-Order Risk Effects," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  4. Hartley, Roger & Lanot, Gauthier & Walker, Ian, 2006. "Who really wants to be a millionaire? Estimates of risk aversion from gameshow data," The Warwick Economics Research Paper Series (TWERPS) 747, University of Warwick, Department of Economics. [Downloadable!]
    Other versions:
  5. Vincent Crawford & Juanjuan Meng, 2008. "New York City Cabdrivers' Labor Supply Revisited: Reference-Dependence Preferences with Rational-Expectations Targets for Hours and Income," University of California at San Diego, Economics Working Paper Series 2008-03, Department of Economics, UC San Diego. [Downloadable!]
    Other versions:
  6. Fabian Herweg & Daniel Müller & Philipp Weinschenk, 2008. "The Optimality of Simple Contracts: Moral Hazard and Loss Aversion," Bonn Econ Discussion Papers bgse17_2008, University of Bonn, Germany. [Downloadable!]
  7. Bruce I. Carlin & David T. Robinson, 2009. "Fear and loathing in Las Vegas: Evidence from blackjack tables," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 4(5), pages 385-396, August. [Downloadable!]
    Other versions:
  8. repec:bep:eapadv:v:8:y:2008:i:1:p:1798-1798 is not listed on IDEAS
  9. Robin Hogarth & Natalia Karelaia & Carlos Andrés Trujillo, 2009. "Under-achievement and the glass ceiling: Evidence from a TV game show," Economics Working Papers 1165, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  10. 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, Swedish Institute for Social Research. [Downloadable!]
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