We examine the risky choices of contestants in the popular TV game show "Deal or No Deal" and related classroom experiments. Contrary to the traditional view of expected utility theory, the choices can be explained in large part by previous outcomes experienced during the game. Risk aversion decreases after earlier expectations have been shattered by unfavorable outcomes or surpassed by favorable outcomes. Our results point to reference-dependent choice theories such as prospect theory, and suggest that path-dependence is relevant, even when the choice problems are simple and well defined, and when large real monetary amounts are at stake.

This paper issues a warning that compounding daily returns of the Center for Research in Security Prices (CRSP) equal‐weighted index can lead to surprisingly large biases. The differences between the monthly returns compounded from the daily tapes and the monthly CRSP equal‐weighted indices is almost 0.43 percent per month, or 6 percent per year. This difference amounts to one‐third of the average monthly return, and is large enough to reverse the conclusions of a paper using the daily tape to compute the return on the benchmark portfolio. We also investigate the sources of these biases and suggest several alternative strategies to avoid them.

We examine high stakes three-person bargaining in a game show where contestants bargain over a large money amount that is split into three unequal shares. We find that individual behavior and outcomes are strongly influenced by equity concerns: those who contributed more to the jackpot claim larger shares, are less likely to make concessions, and take home larger amounts. Contestants who announce that they will not back down do well relative to others, but they do not secure larger absolute amounts and they harm others. There is no evidence of a first-mover advantage and little evidence that demographic characteristics matter.