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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 SeriesDate posted: December 16, 2004 ; Last revised: August 05, 2008Suggested CitationContact Information
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