Decision making and risk aversion in the Cash Cab

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 game shows used to examine 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. Teams are much more likely to complete overall tasks successfully. 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.