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

50 Pages Posted: 16 Dec 2004 Last revised: 21 Feb 2012

See all articles by Thierry Post

Thierry Post

Graduate School of Business of Nazarbayev University

Martijn J. van den Assem

Vrije Universiteit Amsterdam

Guido Baltussen

Erasmus University Rotterdam (EUR); Robeco Quantitative Investments

Richard H. Thaler

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Date Written: February 20, 2012

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.

Keywords: Decision making under risk, Expected utility theory, Prospect theory

JEL Classification: D81

Suggested Citation

Post, Thierry and van den Assem, Martijn J. and Baltussen, Guido and Thaler, Richard H., Deal or No Deal? Decision Making under Risk in a Large-Payoff Game Show (February 20, 2012). American Economic Review, Vol. 98, No. 1, pp. 38-71, March 2008, Available at SSRN: https://ssrn.com/abstract=636508

Thierry Post (Contact Author)

Graduate School of Business of Nazarbayev University ( email )

53 Kabanbay Batyra Avenue
Astana, 010000
Kazakhstan

Martijn J. Van den Assem

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Guido Baltussen

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Robeco Quantitative Investments ( email )

Weena 850
Rotterdam, 3011 AG
Netherlands

Richard H. Thaler

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-5208 (Phone)
773-702-0458 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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