Does Risk Aversion Vary with Decision-Frame? An Empirical Test Using Recent Game Show Data

An aspect of prospect theory posits that decision-makers, when making decisions in the face of risk, make their decisions with respect to a pre-existing reference point or ‘frame’ (the statusquo bias). We utilize data from the Australian version of the TV game show, Deal or No Deal, to explore whether risk aversion varies with a change in reference point in a context where stakes are real and high.We achieve this by exploiting a special and unique Australian feature of the Deal or No Deal lottery-choice setting, namely, the existence of the Chance or the SuperCase rounds (supplementary rounds). These rounds reverse the decision-frame that was obtained in earlier (normal) rounds. We fit and estimate a complete dynamic decision-making model to our dataset and find that the risk aversion estimate of contestants who participated in both the normal and the supplementary rounds indeed differs depending on the nature of the round, a result consistent with the operation of the existence of a framing effect.