Abstract

http://ssrn.com/abstract=989242
 
 

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Risky Choice and the Relative Size of Stakes


Guido Baltussen


Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Thierry Post


Koc University - Graduate School of Business

Martijn J. Van den Assem


Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

May 2008


Abstract:     
We examine framing effects by analyzing how risky choice depends on the absolute and relative size of the amounts at stake, using an extensive sample of choices from ten different editions of the large-stake TV game show Deal or No Deal. Our analyses within and across the samples suggest that risky choice is highly sensitive to the context, as defined by the initial set of prizes in the game. In each sample, contestants respond in a similar way to the stakes relative to their initial level, even though the initial level differs widely across the various editions. Amounts therefore appear to be primarily evaluated relative to a subjective frame of reference rather than in terms of their absolute monetary value.

Number of Pages in PDF File: 31

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

JEL Classification: D81, C93

working papers series


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Date posted: May 29, 2007 ; Last revised: May 6, 2008

Suggested Citation

Baltussen, Guido and Post, Thierry and Van den Assem, Martijn J., Risky Choice and the Relative Size of Stakes (May 2008). Available at SSRN: http://ssrn.com/abstract=989242 or http://dx.doi.org/10.2139/ssrn.989242

Contact Information

Guido Baltussen
Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )
P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands
Thierry Post
Koc University - Graduate School of Business ( email )
Rumelifeneri Yolu
34450 Sariyer
Istanbul
Turkey
Martijn J. Van den Assem (Contact Author)
Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )
P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands
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