Scandinavian Working Papers in Economics

Working Paper Series,
Stockholm University, Swedish Institute for Social Research

No 9/2006: Testing the rationality assumption using a design difference in the TV game show 'Jeopardy'

Gabriella Sjögren Lindquist () and Jenny Säve-Söderbergh ()
Additional contact information
Gabriella Sjögren Lindquist: Swedish Institute for Social Research, Stockholm University, Postal: SE-106 91 Stockholm, Sweden
Jenny Säve-Söderbergh: Swedish Institute for Social Research, Stockholm University, Postal: SE-106 91 Stockholm, Sweden

Abstract: This paper empirically investigates the rationality assumption commonly applied in economic modeling by exploiting a design difference in the game-show Jeopardy between the US and Sweden. In particular we address the assumption of individuals’ capabilities to process complex mathematical problems to find optimal strategies. The vital difference is that US contestants are given explicit information before they act, while Swedish contestants individually need to calculate the same information. Given a rationality assumption of individuals computing optimally, there should be no difference in the strategies used. However, in contrast to the rational and focal bidding behaviors found in the US, the Swedish players display no optimal behavior. Hence, when facing too complex decisions, individuals abandon optimal strategies.

Keywords: Rationality; Bounded Rationality; Field Experiments

JEL-codes: C72; C93; D81

28 pages, December 28, 2006

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