Too scared to be a millionaire

Discussion in 'Psychology' started by Hulk Hoser, Aug 25, 2005.

  1. Is this true?

    Too scared to be a millionaire?

    Most people are not natural gamblers, reveals a study of the game show Who Wants to be a Millionaire?. As a group, contestants would take home a lot more money if they took more risks.

    Economists know that some people worry more than others – especially about the prospect of painful losses – when facing decisions with uncertain outcomes. A fearless gambler may take any bet with favourable odds, but many people, being "risk averse", will pass on such bets just to avoid the possibility of a significant loss.

    As economist Gauthier Lanot of the Queen's University in Belfast, Northern Ireland and colleagues have now shown, “risk averse” seems to describe how most people play Who Wants to be a Millionaire.

    They modelled the behaviour of 515 participants in the first eleven series of the UK game, in which players face a sequence of multiple-choice questions, continuing as long as they answer correctly. A player's potential winnings roughly double at each stage, but they also face progressively greater losses – and, consequently, a temptation to quit while ahead.
    Against nature

    Of the 515 contestants, only three contestants went the entire way to win the £1 million. In general, participants were so risk averse that roughly two-thirds left the programme by quitting while they were ahead, while only one-third ended the game by gambling on a question they then answered incorrectly.

    The economists’ analysis, based around a mathematical model, suggest that more people would have won a million – and the contestants have taken home more overall – if they were less risk averse and willing to gamble. But contestants would also have suffered some staggering losses, which is against human nature. "Most people are not reckless,” says Lanot. “They are cautious and worry a lot about losses."

    He believes the contestants are a good model for the rest of the population in terms of risk-taking. “No university would ever fund us to do something like this,” he adds.

    The study was presented at the World Congress of the Econometric Society at University College London, UK on Wednesday.
  2. A key thing is missing in this study. Would having $200,000 or $400,000 does really make a difference?

    No it won't. $200,000 is still a LOT of money and the marginal utility of each increase in a $1 over that would be too low, that the rest of the $200,000 could be valued at around $20,000.

    Thus, a better question would be, would you have $200,000 or $ 220,000 ?

    It really doesn't make a difference.
  3. Bad title.

    The only way "scared" would be appropriate is if someone quit when he knew the answer "because he was scared of all that money"... ridiculous.

    Why would any sensible person risk maybe $100K on a guess when that amount of money is probably significant to him?
  4. I think they are misguided thinking that "the contestants (would) have taken home more overall" matters in any way. Sitting in that chair I wouldn't care about 550 other people that I don't know, or our winnings as a group.

    Would you rather take home 100k, or have someone else win 1mil?

    It's not fear that makes them take the money, it's rational thinking.

  5. There was a good article on this in the last SFO regarding how people look at risk. Very interesting read. I will see if I can dig it up.
  6. risk taking ought to be distinguished from gambling.
  7. Yet another dazzling contribution from the publish-or-perish world of academia.
  8. :D
  9. I would love to read it! Please! Psychology of risk aversion is a fascinating issue!
  10. Maybe. But each stands on its own merit does it not?
    #10     Aug 25, 2005