The results of psychological research surround us every day, but few of us are aware of them. Psychology is interested in the study, observation and explanations for individual human behavior. It’s not about studying mice in labs anymore (although that’s still done, mostly in undergraduate psychology classes) so much as it is about studying real people in pseudo-real situations to better understand how and why people act, think or feel in the ways that they do.
Sometimes that research results in unintended offspring, such as the U.S. television show, Deal or No Deal.
Hosted by Canadian comedian and actor Howie Mandel, the show revolves around a single contestant who has to make a simple risk aversion choice — choose to keep an unknown amount of money the contestant holds in a closed briefcase, or exchange a known amount of money offered to the contestant for their briefcase.
The contestant learns what their briefcase may hold by choosing a number of the remaining 25 unopened briefcases, and learning what amounts they hold. Typically the highest game prize is $1,000,000, meaning that as the game progresses and the contestant learns more and more about what amount he or she may hold, they are offered more and more amount of money for their briefcase (but always 20-90% less than the highest possible amount they hold).
A contestant wins the game by choosing to take the deal — the amount offered for their briefcase — or by going all the way until the game’s end and finding out what amount is in their briefcase.
The game can be traced back to the work of Daniel Bernoulli and an essay he published in 1738 in which he attempted to explain why people are generally averse to risk and why risk aversion decreases with increasing wealth.
In more modern times, two researchers — Daniel Kahneman and Amos Tversky — expanded upon Bernoulli’s work and explained the intersection between economics and psychology. Specifically, they examined and explained why people are often more likely to take a seemingly more conservative choice, even when that choice carries less financial reward (and in whole risk terms, the conservative choice may actually be the more riskier financial choice). The work of Kahneman and Tversky in the 1980s on financial loss aversion remains the seminal work to understand how and why we make the financial decisions we do in our lives.
Kahneman, a psychologist, eventually went on to win a Nobel Prize in economics for his research in this area.
You wouldn’t be surprised to learn that Deal or No Deal is not alone in borrowing from psychological research. Many modern game shows have elements lifted directly from our understanding of human behavior. It can make for an entertaining hour!
Kahneman, D. & Tversky, A. (1984) Choices, values, and frames. American Psychologist, Vol 39(4), pp. 341-350. (PDF)