DEAL OR NO DEAL

Deal or no deal is a game where the contestant will be given a chance to choose a random
briefcase with a number, which the idea is, in the briefcase there will an amount of money. The
money varied starting from 0.01 Euro until 5.000.000 Euro. The contestant will keep the briefcase
and then will open other briefcases one by one.
In certain session, there is a person called as the banker. The banker here offers a visible
amount of money based on how much money the contestant has open in the other briefcases. This
is to influence the contestant since the contestant does not know how much money is inside their
own briefcase. The contestant then can accept the offer, or deny the offer. It is up to themselves.
There is a certain behavior that has effected the players of this game. This is called as the
behavioral economics. Let’s just say, in daily life, what you see is that people will make
decisions with the result that provide them with the greatest benefit and satisfaction. In
economics however, when people are presented with diverse selection of conditions especially of
scarcity, they will choose the option that maximizes their individual satisfaction. Behavioral
economics explores the way of thinking why somebody is making irrational decision just like
what happen in this game. Because in a way, humans are not perfect and even the most rational
person born in this world, there will be a time where this person is not capable of making good
decision.
One episode of Deal or no deal game has showed a contestant who reject the amount of
money of $416.000. Here, the cases left is the one with $1 in it and $1.000.000. Rationally
speaking, jump from $1 to $416,000 is a big jump and it will give a big satisfaction for him.
Meanwhile if, in a way, the contestant predicted that will he will not get the 1 million dollar, he
has lost the chance of getting $416,000 from $1,000,000 which the pain that maybe can be put in
numbers is that around $584,000. Meanwhile, losses can be felt even worse than winning. To
know why, we call it the the prospect theory
What is prospect theory? Prospect theory assumes that losses and gains are valued
differently, and thus individuals make decisions based on perceived gains instead of perceived
losses. Prospect theory challenged the utility theory where Bernoulli assumes that utility for gain
of wealth is calculated the same as utility of loss of wealth. He assumed risk aversion to be
equally influential as loss aversion. However, it is not true and can be seen from the game.
 Deal or no deal showed some adaptation of what we call as reference point. Gains and
losses cannot be valued at the same price since it is depended on the reference point. Example, A
and B both has 5 Million today. But yesterday, A has 9 Million and B has 1 Million. A and B
cannot value the 4 million the same way. A count is a losses and B count it as gains. Deal or no
deal is a huge set of available data of simple, well-defined game where large monetary amounts
are at stake. This game can proof that the prospect theory is used and also an incomplete
adaptation of reference point. In the game that the class played does not really show variations of
the prospect theory because it was only played from several rounds and the contestant can be
regarded as doing rational decisions since the game was been done in a rational decision making
class. However, we can also analyze the biases and heuristics happened here and the proof of
reference point.
The first session of the game, round 3, the bank offer is 157,600 Euro and in the next
round it drops to 123.170 Euro. In a rational world where everything is perfect, you do not want
to lose more. The contestant here disregard this lost and choose to continue the game into several
rounds. Meanwhile, in the second session, the game stopped at the round where the bank offer
fluctuates from 216.760 Euro to 405.956 Euro. Not wanting to lose even more and thinking that
the 400k is enough, the contestant chooses to get the offer. The contestant showed a decision that
was influenced from what happened in the first session. In the first session, the contestant loses
several of money and ended up not having a very big amount, therefore when the second
contestant play the game, she sets up the standard from the first player into her game.
This is where the application of behavioral economics is shows. One of them is the biases
and heuristics. There are several types of bias and heuristics. Bias is connected to comparing into
another situation while heuristic is where you have these mental shortcuts of making decisions.
One type of the bias is the confirmation bias. This is the tendency to favor information which
supports prior conviction. They want to believe what they want to believe. The concept of, “if
the cases opened is getting bigger, therefore the offer from the bank will be lower”. This
situation happens one time in the class where it was confusing when an offer is getting bigger
when the cases opened was mostly big numbers. They way of thinking was not rational because
it is believed that, if big cases are opened, offers will be lower. We were blinded that actually, we
have to calculate the opened numbers and count the expected value. But, we don’t. That’s why
we were so shocked when this happens and find it weird, while actually it is not weird if it is
calculated. An inattentional blindness, lack of attention to how this banker gets its number. The
confirmation bias can be seen from this point.
Other bias is the hindsight bias. The next contestant did this. Doing games with the
standards of the previous game. The event is seen to be predictable, despite there having been
little or no objective basis for predicting it. The game is different for each players, however this
contestant does not want to make the same mistake. Looking at the previous player that only
choose the case with 5000 Euro in it, makes her thinking that it is not possible for me to get the
5,000,000 Euro. There is no possible way. So she believes it and does not continue the game and
stopped where the numbers are high enough, even though she has many cases to be opened. Here
the situation is, the first player plays so many rounds and then get not that much. The next
contestant does not want to play that much because she does not want lose that much. First game
was played for around 7 rounds and the next game was played for around 4 rounds. She knew it.
She knew what is in her case. But unfortunately, she doesn’t. At the end it was revealed that she
is actually capable of having the 5,000,000 Euro in her case.
These biases can also be seen as where the availability heuristics came from. The making
of judgments about the likelihood of an event based on how something has come out in his or her
mind. When the information is more familiar, it is believed to be true. Possibility of people
getting the highest number in the case is small and nearly impossible. Believed to be true. Or,
playing more rounds will just make the contestant lose more, believed to be true and the
contestant will choose to play fewer rounds.
Overconfidence. Maybe this cannot be seen directly from the game played in the class.
But in the class where an episode of deal or no deal is being shown, it shows the contestant
overconfidence of getting the $1,000,000. The contestant believes that he is lucky today. Also
with the influence of his family which also can be seen as threatening him if he does not choose
to refuse the bank offer, they will not love if or something like that. This leads an overconfidence
where in a way he also thought that, I am doing this for my family, I am going to make them
proud. But family, whatever the condition is, they will always love you. This person is not
thinking clear and look at the end, he only gets $1 because of his overconfidence.
The reference point is different for each player. The briefcases opened are different for
every player. How each player perceive the game is different, how they count lost and gains.
Since the second player has been influenced from the first player, she might be counting the loss
even greater than the first one. She does not to make the same mistake. And it is true also when
she opened cases with low numbers, she keeps getting low numbers and when it comes to getting
high numbers, she perceived the high number as a very big loss. It is different from the first
session where the player gets high and low numbers somehow in an equal way. The first player
valued losses of high numbers differently from the second player because the second player was
used to getting low numbers and high numbers are shocking.
Most people said that this game is just a matter of luck, or intuitive. It is true that the
game is intuitive. However, luck is something that cannot be considered fairly true. The bank
offer is something that the contestant can either offer or reject the offer. This is a choice, where
the contestant may have calculated the expected value of the offered money. The game is not a
matter of luck. The fortune or misfortune is the development of the game that is influencing the
reference point.
In conclusion, this game is very interesting, proving that people cannot make rational
decisions at all times. Contestants runs into non-rational escalation of commitments and become
over optimistic. People should be aware and smart at perceiving a situation, even at the worst.
This game taught how rational-decision makers that different situations should be faced
differently. The worse the situation is, the calmer we should be. But we also have to accept the
fact that, nobody is perfect.