Risky Choice and Type-Uncertainty in "Deal or No Deal?"

Christopher Gee

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: This paper uses data from the popular television game-show, "Deal or No Deal?", to analyse the way individuals make choices under risk. In a unique approach to the problem, I present a formal game-theoretical model of the show in which both the contestant and the banker are modelled as strategic players. I use standard techniques to form hypotheses of how rational expected utility-maximisers would behave as players in the game and I test these hypotheses with the relevant choice data. The main result is that an increasing o¤er function is the result of optimal behaviour when the banker is uncertain about the contestant.s risk attitudes. This result provides a theoretical foundation to the empirical model of the banker that pervades the literature. Estimates of the coefficient of relative risk aversion are consistent with estimates from other studies and estimates of the discernment parameter suggest contestants have difficulty making choices.

Keywords: Choice under Risk; Expected Utility; Asymmetric Information; Risk-Aversion (search for similar items in EconPapers)
JEL-codes: C72 C93 D81 D82 (search for similar items in EconPapers)
Pages: 24
Date: 2007-11
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:0758

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