Studying 'Deal or No Deal' Risk Behaviors Behavioral economists are studying how people deal with financial risk by observing the actions of contestants on the surprise hit NBC game show Deal or No Deal. On the show, players must decide between a guaranteed cash prize or the chance to win a bigger treasure.
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Studying 'Deal or No Deal' Risk Behaviors

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Studying 'Deal or No Deal' Risk Behaviors

Studying 'Deal or No Deal' Risk Behaviors

Studying 'Deal or No Deal' Risk Behaviors

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  • <iframe src="https://www.npr.org/player/embed/5243893/5243894" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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Behavioral economists are studying how people deal with financial risk by observing the actions of contestants on the surprise hit NBC game show Deal or No Deal. On the show, players must decide between a guaranteed cash prize or the chance to win a bigger treasure.

MADELEINE BRAND, host:

The primetime game show Deal or No Deal caps a week-long blitz on NBC tonight. Whether or not anyone claims the top prize of three million dollars, the show has already given a ratings boost to the network. And as NPR's Scott Horsley reports, social scientists are also tuning in to see what they can learn from the show about consumer spending habits.

SCOTT HORSLEY reporting:

Richard Faylor(ph) is a behavioral economist at the University of Chicago, which means he studies the way people make decisions about money. Sometimes he runs experiments like offering graduate students $30 and testing their willingness to gamble with it. But this week Faylor can just turn on his TV and observe an experiment with much higher stakes.

(Soundbite of TV show Deal of No Deal)

Mr. HOWIE MANDEL (On Deal of No Deal): A one million dollar to prize. No crazy stunts, no trivia, no skill. All this person must be able to do is answer one simple question. And that question is, Deal or No Deal?

HORSELY: The game show, running every night this week on NBC, has a simple premise. A player chooses one of 26 briefcases containing prizes ranging from a penny to $1 million or more. The remaining cases are then opened, one by one, and as the list of available prizes shrinks, the player is periodically given the option of taking a buyout, somewhat below the average of the remaining prizes, or continuing to play in hopes of winning more.

For researchers like Faylor it's a good window into people's economic decision making.

Mr. FAYLOR (Researcher): It really boils down to a very simple question of whether you'd want a certain amount of money or a very well defined gamble.

HORSLEY: Or, as show host Howie Mandell puts it...

Mr. MANDEL: Deal or No Deal.

HORSLEY: Classic economic theory suggests that if people are offered $50.00 as a sure thing or a coin toss for a chance at $100.00, most will take the guaranteed 50. They might even settle for 45 if they're naturally cautious. But people don't always behave that way, and figuring out why is the kind of thing economists win Nobel prizes for.

Faylor has now joined a team of researchers from the Netherlands, where Deal or No Deal originated, and led by a Dutch economist Faylor describes as the world's leading authority on the game show.

One of their findings is that players who are unlucky in the early rounds and lose their chance at the biggest prizes take more and more risk as the game goes on.

Mr. FAYLOR: One contestant faced a very simply choice and she decided to gamble. She said out loud at the time, Well, it's only $10,000.00 I'm risking. Ten thousand dollars would strike her as quite a bit of money in some other situations.

HORSLEY: Faylor suspects in the high stakes environment of the game, $10,000 just doesn't seem like that much money. A second explanation is that unlucky players who missed their chance for the biggest prizes early on may feel as if they've actually lost money, and Faylor says it's common for people in that mental state to take more risk in hopes of reaching a psychological break-even point. He's seen that at the racetrack, where losing gamblers bet more on longshots, and he's seen it in the financial markets.

Mr. FAYLOR: Mutual fund managers who are trailing their benchmarks in the first quarter take on more risks than ones who are ahead of their benchmark.

HORSLEY: Researchers acknowledge a game show with bright lights and beautiful models may not be the best model of how people behave in other settings. Psychologist Zur Shapira of New York University studies managerial risk taking. He once looked at the bets made in final Jeopardy and says players' emotions play a big role.

Mr. ZUR SHAPIRA (Psychologist, New York University): We presented the paper on Jeopardy in a conference at Harvard, and a lot of the professors got up there and said, You know, I want to tell you a secret, I was on Jeopardy one time, and I can tell you I was very nervous.

HORSLEY: That hasn't stopped researchers from looking to pressure-packed game shows for clues into people's every day decision-making, and if you think this is just a clever way for economists to get paid for watching television, Faylor says no deal.

Mr. FAYLOR: Let's just say I'm not a television critic, so, you know, I'd rather not comment on the entertainment alley of the show.

HORSLEY: Viewers have made their decision. Deal or No Deal won its timeslot in its debut Monday night.

Scott Horsely, NPR News.

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