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

Thierry Post
Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Tinbergen Institute; Erasmus Research Institute of Management (ERIM) - Joint Research Institute of Rotterdam School of Management (RSM) and Erasmus School of Economics (ESE), EUR; City University London - Sir John Cass Business School; University of Wales System - Prifysgol Bangor University

Martijn J. Van den Assem
Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Guido Baltussen
New York University - Stern School of Business; New York University - Department of Finance

Richard H. Thaler
University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)



American Economic Review, Vol. 98, No. 1, March 2008

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 Classifications: D81

Accepted Paper Series

Date posted: December 16, 2004 ; Last revised: August 05, 2008

Suggested Citation

Post, Thierry, Van den Assem, Martijn J., Baltussen, Guido and Thaler, Richard H., Deal or No Deal? Decision Making under Risk in a Large-Payoff Game Show. American Economic Review, Vol. 98, No. 1, March 2008. Available at SSRN: http://ssrn.com/abstract=636508


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Contact Information

Thierry Post (Contact Author)
Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )
P.O. Box 1738
3000 DR Rotterdam NL 3062 PA
Netherlands
+31 0 10 408 1428 (Phone)
+31 0 10 408 9165 (Fax)
Tinbergen Institute
P.O. Box 1738
3000 DR Rotterdam Netherlands
Erasmus Research Institute of Management (ERIM) - Joint Research Institute of Rotterdam School of Management (RSM) and Erasmus School of Economics (ESE), EUR
P.O. Box 1738
3000 DR Rotterdam Netherlands
City University London - Sir John Cass Business School ( email )
106 Bunhill Row
London EC1Y 8TZ United Kingdom
University of Wales System - Prifysgol Bangor University ( email )
Bangor, Gwynedd LL57 2DG, Wales United Kingdom
Guido Baltussen
New York University - Stern School of Business ( email )
44 West 4th Street
New York, NY 10012
United States
New York University - Department of Finance ( email )
Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
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
Martijn J. Van den Assem
Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )
P.O. Box 1738
3000 DR Rotterdam NL 3062 PA
Netherlands
Feedback to SSRN (Beta)


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