Deal or No Deal – A Lesson in the Stupidity of Being Greedy

Did anybody catch Deal or No Deal last night? I’m not a statistician but I think it would be interesting to see the math behind the show. Anybody come across any Deal or No Deal analysis? At one point, the lady last night COULD HAVE walked away with $172,000. She kept riding it and eventually left with $5.00! LOL! That’s hilarious.

If you haven’t watched the show yet, you might want to give it a chance.

13 thoughts on “Deal or No Deal – A Lesson in the Stupidity of Being Greedy”

  1. oh gosh oh gosh oh gosh.

    right before yesterday was the first time i watched the show, and yeah.. indeed the greedy part came in. the guy before yesterday.. where Donald Trump came in to gave his “advice” – that guy got really lucky.. he could have walked away with nothing, he kept riding it and got very lucky. his wife and one of his friend kept saying deal deal deal (and one of his stupid friend kept saying roll the dice!)

    I caught the remaining of last night’s show before it ended too.. and yeah the lady could have scored 172k, or even when it was lowered to 90k.. she kept going for it. how silly is that?

    the wikipedia entry on deal or no deal has a good set of info on it, people going on the show should seriously take a look at it, and note the odds themselves.

  2. I did watch it, and while that woman was very charming, her decision making skills were atrocious. The stats behind it are interesting, and the paper that has been referenced is here: SSRN.

    I haven’t read it yet, and I’m also not a statistician, but it seems to me that as the choices become more limited the “banker” offers something marginally less than the statistical expected outcome. I was generally able to guess within a pretty small margin what the banker offer was going to be.

    I thought the guy pushed it more than he should have, but didn’t fully disagree. If he hit one of the big numbers, he could have walked out with something like $175k instead of $250k or whatever. A big loss, but not a travesty. By going for it with only one big number left, the woman was taking far too large a risk.

  3. The “Banker” always offers less than the expected value of the game (the EV is simply the total pot remaining divided by the number of cases). Statistically speaking, one should never take the offer, so her decision could not possibly be considered “stupid”, and is less “greedy” than mathematically correct.

    However, the discount to EV is there to provide the house an advantage over the long term. A single contestant cannot play more than one game, so personal risk has to come into play for that game.

  4. We are the opposite, my wife loves it and I tolerate it. I just think that most of the idio…I mean people are totally gambling. They have no clue if they should of should not keep going. I prefer games where you have to know something (Jeopardy), not games that are totally just luck. All that matters is which numbers they pick since it is obvious that most are not considering the odds at all.

  5. Anon makes a good point about the EV of the game. The Banker always offers a deal which is less than your EV, preying on people’s fear of walking away with very little money. (It also serves to make people more inclined to choose “no deal” which makes the show more entertaining.)

    I believe this is a general phenomenon with gambling for large stakes (like the lottery). House percentages can be much higher when the stakes are larger because people are willing tradeoff EV for hope of a big payoff.

    While the show is pretty entertaining, I think it would be much more fun if the Banker made his normal -EV deals but also threw in some +EV deals as well. It would be great to see if people are smart enough to figure it out and how they react. Some lower priced +EV deals might be statistically correct to take, but would anyone on the show really take a “correct” $9000 deal, for example, when the chance at hundreds of thousands is staring them in the face?

  6. The EV of Deal or No Deal is NOT the pot remaining divided by the number of cases. I do not know how they come up with their number yet and I was wondering if anyone knew, but it is definately not the average of the remaining case. Anyone know?

  7. Joe,

    The expected value of the deal is always the mean of the boxes still in play. This is because there is an equal chance of any amount being in any of the boxes. So, technically, the EV is amt1*prob of box+amt2*prob of box … Since the prob. of each box being selected is equal (1/number of boxes), this is mathematically equivalent to the mean.

    Perhaps what you are thinking about is EXPECTED UTILITY which now depends upon the risk aversion curve of the individual player. This depends not only on the individual but the level at which they are in the game (people react stronger to losses than gains of equal value) and it is harder to give up a guaranteed $100k for a shot at millions than it is to give up a guranteed $10 for a shot at hundreds.

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