Decision Making and Risk Aversion in the Cash Cab

36 Pages Posted: 25 Apr 2011

See all articles by Richard T. Bliss

Richard T. Bliss

Babson College - Finance Division

Mark Potter

Babson College - Finance Division

Christopher Schwarz

University of California at Irvine

Date Written: April 21, 2011

Abstract

We use the Emmy Award-winning game show Cash Cab to study decision-making in a risky framework. This is a unique environment because, unlike other studies on risk-aversion, players participate individually or in teams varying in number from two to five. This creates a natural laboratory to measure performance and risk aversion conditional upon the size of the team as well as the characteristics of the team members. Our results are striking. Teams are much more likely to complete overall tasks successfully. There are noted differences conditional on gender makeup of the groups. Most importantly, risk aversion estimates indicate that when participants are part of a group, they focus on the overall size of the dollar amounts that are “at risk”, rather than their “slice of the pie”. The implications of our results span a number of areas where groups are part of the financial decision-making process, including investment analysis and portfolio management, corporate governance, and corporate finance.

Keywords: Cash Cab, Risk Aversion, Teams, Group Decision Making

JEL Classification: D8

Suggested Citation

Bliss, Richard T. and Potter, Mark E. and Schwarz, Christopher, Decision Making and Risk Aversion in the Cash Cab (April 21, 2011). Available at SSRN: https://ssrn.com/abstract=1818145 or http://dx.doi.org/10.2139/ssrn.1818145

Richard T. Bliss (Contact Author)

Babson College - Finance Division ( email )

Babson Park, MA 02457-0310
United States
781-239-5883 (Phone)
781-239-6465 (Fax)

Mark E. Potter

Babson College - Finance Division ( email )

Tomasso Hall #120
Babson Park, MA 02457-0310
United States
781-239-6492 (Phone)
781-239-5004 (Fax)

Christopher Schwarz

University of California at Irvine ( email )

Irvine, CA 92697-3125
United States

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