# Darden's Luckiest Student 2008

11 Pages Posted: 23 Jun 2009

See all articles by Samuel E. Bodily

## Samuel E. Bodily

University of Virginia - Darden School of Business

## Phillip E. Pfeifer

University of Virginia - Darden School of Business

### Abstract

The case describes a three-factor, full-factorial experiment run in conjunction with the Darden's Luckiest Student event of 2008. Prior to identifying Darden's Luckiest, all 300 first-year students made binding decisions between varying amounts of cash and the opportunity to select one of two identical briefcases. One briefcase contained \$18,750; the other contained \$0. Students are asked to analyze the results of the experiment and draw conclusions with respect to how the experimental factors influenced student decisions.

Excerpt

UVA-QA-0717

Rev. Apr. 23, 2013

DARDEN'S LUCKIEST STUDENT 2008

Sam Bodily looked at the data and could only shake his head in amazement. (See Exhibit 1.) It was February 2007, and Bodily was looking over the “certainty equivalents” that the first-year students at the Darden Graduate School of Business Administration had assessed as part of the Luckiest Student event of 2007. He pondered the information:

The certainty equivalents are supposed to represent the fixed amount of cash that is equivalent to the value of a random briefcase. We explained very carefully that one lucky student would get to pick one of two identical briefcases. One briefcase contained \$ 0, the other briefcase contained \$ 17,500. Barring some supernatural ability to see inside the briefcase, that means a randomly chosen briefcase has an equal chance of containing \$ 0 or \$ 17,500. The expected monetary value (EMV) of the briefcase is \$ 8,750. Which means if you are risk averse (and most people are risk averse), your certainty equivalent should be a number less than \$ 8,750. But look at the numbers we got! Over 100 (104 to be exact) were above the EMV. Another 37 were exactly equal to the EMV, and only 178 were below the EMV. Although the majority of the numbers were below the EMV, I thought almost everyone would be below the EMV. Can it be that so many students are risk-seeking people?

Darden's Luckiest Student 2007

. . .

Keywords: risk aversion, design of experiments, hypothesis test

Suggested Citation

Bodily, Samuel E. and Pfeifer, Phillip E., Darden's Luckiest Student 2008. Darden Case No. UVA-QA-0717. Available at SSRN: https://ssrn.com/abstract=1423303