Deal or No Deal, that is the Question: The Impact of Increasing Stakes and Framing Effects on Decision-Making Under Risk

24 Pages Posted: 8 Jun 2009

See all articles by Robert D. Brooks

Robert D. Brooks

Monash University; Financial Research Network (FIRN)

Robert W. Faff

University of Queensland

Daniel Mulino

Monash Business School

Richard Scheelings

Victorian Bar

Abstract

In this paper, we utilize data from the Australian version of the TV game show, ‘Deal or No Deal’, to explore risk aversion in a high real stakes setting. An attractive feature of this version of the game is that supplementary rounds may occur which switch the decision frame of players. There are four main findings. First, we observe that the degree of risk aversion generally increases with stakes. Second, we observe considerable heterogeneity in people's willingness to bear risk – even at very high stakes. Third, we find that age and gender are statistically significant determinants of risk aversion, while wealth is not. Fourth, we find that the reversal of framing does have a significant impact on people's willingness to bear risk.

Suggested Citation

Brooks, Robert Darren and Faff, Robert W. and Mulino, Daniel and Scheelings, Richard, Deal or No Deal, that is the Question: The Impact of Increasing Stakes and Framing Effects on Decision-Making Under Risk. International Review of Finance, Vol. 9, Nos. 1-2, pp. 27-50, March/June 2009, Available at SSRN: https://ssrn.com/abstract=1414483 or http://dx.doi.org/10.1111/j.1468-2443.2009.01084.x

Robert Darren Brooks

Monash University ( email )

Wellington Road
Clayton, Victoria 3168
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Robert W. Faff

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Daniel Mulino

Monash Business School ( email )

Economics Department
Wellington Road
Clayton 3168, Victoria
Australia
61 3 9905 8159 (Phone)
61 3 9905 5476 (Fax)

Richard Scheelings

Victorian Bar ( email )

C/- Clerk G
Melbourne, Victoria 3000
Australia

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