Decision Making Under Risk in Deal or No Deal

We analyse the choices of 399 contestants in the Australian version of the television game show Deal or no Deal. As a first pass at the data, we calculate risk-aversion bounds for each contestant, revealing considerable heterogeneity. We then estimate a structural stochastic choice model that captures the dynamic decision problem faced by contestants. To address individual heterogeneity, we nest the dynamic problem within the settings of both a random effects and a random coefficients probit model. Our structural model produces plausible estimates of risk aversion, confirms the role of individual heterogeneity and suggests that a model of stochastic choice is indeed appropriate. We also examine generalisations to expected utility theory, finding that the rank dependent utility model provides substantially improved explanatory power. Finally, we do not find strong evidence in favour of an endowment effect for lotteries