Risk attitudes in large stake gambles: evidence from a game show (original) (raw)
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2006
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.
Theory and Decision, 2008
In the television show Deal or No Deal a contestant is endowed with a sealed box, which potentially contains a large monetary prize. In the course of the show the contestant learns more information about the distribution of possible monetary prizes inside her box. Consider two groups of contestants, who learned that the chances of their boxes containing a large prize are 20% and 80% correspondingly. Contestants in both groups receive qualitatively similar price offers for selling the content of their boxes. If contestants are less risk averse when facing unlikely gains, the price offer is likely to be more frequently rejected in the first group than in the second group. However, the fraction of rejections is virtually identical across two groups. Thus, contestants appear to have identical risk attitudes over (large) gains of low and high probability.
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We develop and evaluate a simple gamble-choice task to measure attitudes toward risk, and apply this measure to examine differences in risk attitudes of male and female university students. In addition, we examine stereotyping by asking whether a person's sex is read as a signal of risk preference. Subjects choose which of five 50/50 gambles they wish to play. The gambles include one sure thing; the remaining four increase (linearly) in expected payoff and risk. Each subject also is asked to guess which of the five gambles each of the other subjects chose, and is paid for correct guesses. The experiment is conducted under three different frames: an abstract frame where the two highest-payoff gambles carry the possibility of losses, an abstract frame with no losses, and an investment frame that mirrors the payoff structure of the former. We find that women are significantly more risk averse than men in all three settings, and predictions of both women and men tend to confirm this difference. While average guesses reflect the average difference in choices, only 27 percent of guesses are accurate, which is slightly higher than chance.
Who Really Wants to Be a Millionaire? Estimates of Risk Aversion from Gameshow Data
Journal of Applied Econometrics, 2013
There is a considerable variation in estimates of the degree of risk aversion in the literature. This paper analyses the behaviour of contestants in one of the most popular TV gameshows ever to estimate a CRRA model of behaviour. This gameshow has a number of features that makes it well suited for our analysis: the format is extremely straightforward, it involves no strategic decision-making, we have a large number of observations, and the prizes are cash and paid immediately, and cover a large range -up to £1 million. Our data sources have the virtue that we are able to check the representativeness of the gameshow participants. While the game requires skill, which complicates our analysis, the structure of the game is very simple so that complex probability calculations are not required of participants.
Measuring Risk Attitudes in a Natural Experiment: Data from the Television Game Show Lingo
The Economic Journal, 2001
We use data from a television game show involving elementazy lotteries and substantial prize money as a natural experiment to measure risk attitudes. We find robust evidence of substantial risk aversion. As an extension, we estimate the vazious models using transformations of the "true" probabilities to decision weighta. The estimated degree of risk aversion increases further, while players tend to substantially overestimate their chances of winning. CRRA and CARA utility epecifications perform approximately equally well, with CARA having the advantage that the players' decisions do not depend on their initial wealth.
Empirical investigation of some properties of the perceived riskiness of gambles
Organizational Behavior and Human Decision Processes, 1986
Empirical tests of some properties of the perceived riskiness of gambles are reported. In experiments conducted with U.S. and German subjects, we observed a remarkable consistency in risk judgments. Four possible measures of risk, derived by R. Duncan Lute, were examined. We found that risk decreases as a constant amount is added to all outcomes of a gamble. ?ivo of Lute's measures require that risk not change with the addition of a constant, and thus these measures are not appropriate for describing perceived risk. We also found that Lute's logarithmic measure is not empirically valid. Lute's fourth measure (the expectation of the absolute value of the outcomes raised to a parameter 0) seems to have more promise than his other three measures. These results provide some necessary conditions that a new theory or extension of Lute's measures must satisfy. 0 1986 Academic Press, Inc. We thank the referees for their suggestions and Joao Becker for his assistance in carrying out statistical tests.
Decision making and risk aversion in the Cash Cab
Journal of Economic Behavior & Organization, 2012
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. 1 The authors would like to thank Tom Cohen of Lion Television and Christine Murphy for her assistance with data entry. All remaining errors are our own. We would also like to thank Peng Peng for his research assistance.
International Review of Finance, 2009
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.
Risk aversion in …, 2007
We review the use of behavior from television game shows to infer risk attitudes. These shows provide evidence when contestants are making decisions over very large stakes, and in a replicated, structured way. Inferences are generally confounded by the subjective assessment of skill in some games, and the dynamic nature of the task in most games. We consider the game shows Card Sharks, Jeopardy!, Lingo, and finally Deal Or No Deal. We provide a detailed case study of the analyses of Deal Or No Deal, since it is suitable for inference about risk attitudes and has attracted considerable attention.