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Who Really Wants to be a Millionaire? Estimates of Risk Aversion from Gameshow Data

  • Gauthier Lanot

    ()

    (Keele University, Centre for Economic Research and School of Economic and Management Studies)

  • Roger Hartley

    (Department of Economics, University of Manchester)

  • Ian Walker

    ()

    (Department of Economics, University of Warwick, Coventry CV4 7AL, UK.)

This paper analyses the behaviour of TV gameshow contestants to estimate risk aversion. We are able to show that the gameshow participants are broadly representative of the population as a whole. The gameshow has a number of features that makes it well suited for our analysis: the format is extremely straightforward, it involves no strategic decision-making, we have a large number of observations, and the prizes are cash and paid immediately, and cover a large range - from £100 up to £1 million. Even though the CRRA model is extremely restrictive we find that a coefficient or relative risk aversion which is close to unity fits the data across a wide range of wealth remarkably well.

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File URL: http://www.keele.ac.uk/depts/ec/wpapers/kerp0607.pdf
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Paper provided by Centre for Economic Research, Keele University in its series Keele Economics Research Papers with number KERP 2006/07.

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Length: 53 pages
Date of creation: Apr 2006
Date of revision:
Handle: RePEc:kee:kerpuk:2006/07
Note: We are grateful to Celador PLC, the gameshow's creator and the UK production company, for their help with gathering the data, and their permission to use it. We are particularly grateful to Ruth Settle who provided detailed advice that helped our understanding of the game. The research was supported by grant R000239740 from the Economic and Social Research Council. However, the views expressed herein are those of the authors alone. The data used in the analysis, and the GAUSS programs developed to conduct the estimation, can be obtained from g.lanot@econ.keele.ac.uk.
Contact details of provider: Postal: Department of Economics, University of Keele, Keele, Staffordshire, ST5 5BG - United Kingdom
Phone: +44 (0)1782 584581
Fax: +44 (0)1782 717577
Web page: http://www.keele.ac.uk/depts/ec/cer/
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Order Information: Postal: Centre for Economic Research, Research Institute for Public Policy and Management, Keele University, Staffordshire ST5 5BG - United Kingdom
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  1. Rabin, Matthew, 2000. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Department of Economics, Working Paper Series qt731230f8, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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  15. Epstein, Larry G & Zin, Stanley E, 1989. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework," Econometrica, Econometric Society, vol. 57(4), pages 937-69, July.
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  17. Anthony B. Atkinson, 1976. "Optimal Taxation and the Direct versus Indirect Tax Controversy," Working Papers 247, Queen's University, Department of Economics.
  18. Raj Chetty, 2003. "A New Method of Estimating Risk Aversion," NBER Working Papers 9988, National Bureau of Economic Research, Inc.
  19. Gertner, Robert, 1993. "Game Shows and Economic Behavior: Risk-Taking on "Card Sharks."," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 507-21, May.
  20. Robert E. Hall, 1981. "Intertemporal Substitution in Consumption," NBER Working Papers 0720, National Bureau of Economic Research, Inc.
  21. Beetsma, R.M.W.J. & Schotman, P.C., 1998. "Measuring Risk Attitudes in a Natural Experiment: Data from The Television Game Show LINGO," Papers 98-48, Southern California - School of Business Administration.
  22. Matthew Rabin & Richard H. Thaler, 2001. "Anomalies: Risk Aversion," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 219-232, Winter.
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