Deal or No Deal?
If you've seen NBC's new game show "Deal or No Deal", you may have quickly realized that it doesn't take an uncanny knowledge of history, art, and pop culture to strike it rich. So why does a show involving dumb luck have economists glued to the television? The Wall Street Journal indicates that behavioral economists have studied a variety of game shows in previous years; however "Deal or No Deal" has created particular excitement mainly because it involves no skill at all. This in turn reduces the variables when comparing subjects. "There is no doubt that these are real people making real choices for high stakes, and we rarely get to observe such pure decisions," says Richard Thaler, a leading behavioral economist at the University of Chicago Graduate School of Business. Why is it that most people will take $450,000 instead of a 50-50 chance at $1,000,000? For many economists questions like these reveal a great deal about risk aversion as well as other behavioral theories. So what would you do with a 50-50 shot at a million dollars: Deal or no deal?