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Dominated choices in a simple game with large stakes

Published online by Cambridge University Press:  14 March 2025

Egil Matsen  and
Bjarne Strøm
Egil Matsen*
Affiliation:
Department of Economics, Norwegian University of Science and Technology, 7491 Trondheim, Norway
Bjarne Strøm*
Affiliation:
Department of Economics, Norwegian University of Science and Technology, 7491 Trondheim, Norway
*
e-mail: [email protected]
e-mail: [email protected]
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Abstract

This paper examines data from the Norwegian television game show Joker, where contestants make well-specified choices under risk. The game involves very large stakes, randomly drawn contestants, and ample opportunities for learning. Central models of risk choice, including expected utility theory, give a simple prediction of choice under weak conditions, as one decision is always first-order stochastically dominating. We document frequent, systematic and costly violations of dominance. Many contestants appear to have a systematic expectation bias that can be related to Tversky and Kahneman's (Cogn. Psychol. 5(2):207-232, 1973) “availability heuristic”. In addition, contestants seem to make systematic calculation errors that are well captured by the so-called Fechner model.

Keywords

Risky choiceStochastic dominanceChoice modelsStakesGame show

JEL classification

C9: Design of Experiments C93: Field Experiments D81: Criteria for Decision-Making under Risk and Uncertainty
Type
Research Article
Information
Experimental Economics , Volume 13 , Issue 1 , March 2010 , pp. 99 - 119
Copyright
Copyright © Economic Science Association 2009

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Footnotes

We thank two anonymous referees, Jordi Brandts (the editor), Kjell Arne Brekke, Glenn Harrison, Ganna Pogrebna, and conference participants at Behavioral and Experimental Economics meetings in Lyon and in Oslo for very useful comments and suggestions. We thank Norsk Tipping and the Norwegian Gaming and Foundation Authority for providing data, especially Terje Helgesen and Kaare Sveen for answering our countless detailed questions.

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