Deal or No Deal? Decision-making under Risk in a Large-payoff Game Show
AbstractWe 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.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 06-009/2.
Date of creation: 11 Jan 2006
Date of revision: 02 Feb 2006
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Web page: http://www.tinbergen.nl
Decision making under risk; Relative risk aversion; break-even effect; real incentives; game show;
Find related papers by 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-02-19 (All new papers)
- NEP-BEC-2006-02-19 (Business Economics)
- NEP-EXP-2006-02-19 (Experimental Economics)
- NEP-UPT-2006-02-19 (Utility Models & Prospect Theory)
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