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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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    File URL: https://papers.tinbergen.nl/06009.pdf
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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.

    More about this item

    Keywords

    Decision making under risk; Relative risk aversion; break-even effect; real incentives; game show;

    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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