Download This PaperDeal or No Deal? Decision Making under Risk in a Large-Payoff Game Show
50 Pages Posted: 16 Dec 2004 Last revised: 21 Feb 2012
Date Written: February 20, 2012
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 Classification: D81
Suggested Citation: Suggested Citation
Richard H. Thaler
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
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