Deal or No Deal – Take $198,000 or Go for $2 Million?


in Investment

Though I don’t spend much time watching TV game shows, Deal or No Deal is one that I pay attention to when it’s on. Watching people make big financial decisions under pressure and in a short time frame is an interesting study in human psychology that’s way bigger than game shows themselves. They all involve similar formats, but on this show the numbers are, well, bigger—which adds to the drama.

On an episode last week a lady was offered a $198,000 deal from the banker if she quit the game at that moment. Even with her husband cheering her on to take the deal, she confidently declared “NO DEAL!”, clapping her hands and smiling merrily as she did.

Now, this is a scenario I’ve seen again and again on this show: a substantial amount of money—often in six figures–is offered to the participant to exit the game. Almost invariably, the participant refuses the deal and opts instead to go for the all the marbles–$2 million.

It often makes me believe that participants are prescreened on this question, and if they indicate any course other than playing the game all the way through to the grand prize they’re disqualified (it’s just a theory based on observation; I have no evidence to support this claim).

Little pigs become fat pigs and—you know what happens to fat pigs

I don’t know about anyone else, but as attractive as $2 million might be, a six figure prize could plug a lot of holes in my financial life, and that’s the route I’d take without much thought.

Now I know that a lot of people faced with the choice of the banker deal versus the grand prize go for the $2 million under the reasoning that “I came in here with nothing so I have nothing to lose—I’m going for the $2 million!” On that point I’m not speculating; I’ve heard many of them say that in exchanges with family members on the side.

As much as I might want to respect that thinking, what happens to the vast majority of the people on the show that opt to go all the way is that they leave the show with far less than the sweet deal the banker offered them when they were at a more opportune position in the game. The lady on the show last week ended up walking away with $60,000, which is actually much better than most participants do. Most come away with only a few thousand dollars after refusing the bankers best deal.

Here’s my thinking on having nothing to lose…True, when you came in, you had nothing to lose; but the banker just offered you $198,000 (or what ever the figure is) and now the dynamics of the situation have changed. Now you do have something to lose–$198,000.

That’s obvious to me sitting at home, so I have to wonder if so many of these people are possessed when they’re on the show and on a roll.

Bringing it home to everyday life

No, I’m not here on a personal finance blog writing about a favorite game show. But I actually think there are lessons from this simple game show that carry over to the real world and perhaps affect our own financial decisions.

When we’re “on a roll”, do we have a tendency to believe that we’re somehow unstoppable? Or that our thinking is incorruptible? Or maybe that we have a “once in a lifetime opportunity” that we want to play to the hilt? Or even that karma has taken over and will guide us to bigger and better things?

Curiously, it’s often when everything looks good, when it looks as if the stars are aligned in our favor that we’re most vulnerable to making poor decisions.

Where can this happen in real life?

The Stock Market. After a run up of greater than 50% from March of 2009 through the spring of 2010, the Dow Jones Industrial Average has given up more than a thousand points.

If you were in the ride up, did you sell near the top? After all, a run of greater than 50% in the space of a single year is quite spectacular—cashing in on those gains would seem to be almost instinctive. How about the market runs of the 1990s, and then during the rally that followed the post dot-com crash that brought the market up to the 14,000 level—how many people cashed out near the top of those runs? Do we believe that rising markets can rise forever? Would we be better served by taking our gains, then sitting on the sidelines until the next market slide, or do we even have the discipline to do so?

The same applies to individual stocks. How many times have you held onto a stock, watching it double, triple, quadruple in price—then watch helplessly as it comes back down to earth?

Selling your home. It’s often said that the first offer you get on your home will usually be the best. But people routinely refuse early offers, only to accept less generous ones a few months down the road.

No one is more confident than a person who has just listed his house for sale, and the memory of bidding wars for properties just a few years ago still sit pleasantly in the recesses of many people’s minds. But reality usually goes in a different direction, as offers tend to get lower as the months pass. Selling prices usually don’t get better with age!

Mortgage rates. In my tenure in the mortgage business, I got to experience “rate greed” first hand. That’s a phenomenon that occurs when rates hit record lows, but people decide to wait to refinance with the expectation of still lower rates.

That may sound absurd on the face of it, after all if rates are at record lows how much better can they get? Yet people would say (with rates at 4.75%) I read on the web the other day that rates are going down to 4.00% so I think we’ll wait. Or, let’s lock WHEN rates hit 4.50%? Do they know something the rest of the financial world doesn’t?

They have something good right in front of them, but they want to keep playing the game waiting for something even better! Here’s the reality of the rate universe: rates that tend to drop ever so slowly will rise in a matter of days or weeks, and rise dramatically at that. Once that happens, today’s rates will be gone and there will be no turning back.

Is the bird in the bush so attractive that we’ll ignore the one that’s sitting right in our hand?

Have you ever been way up on an investment or in a transaction, but greed took over and you ended up walking away with something less—maybe a lot less—than what you could have had? Why do we believe that a good deal will get even better?

Kevin At Out of Your RutThis post is from FiscalGeek staff writer: Kevin Mercadante. I’m very excited to have him contributing to the site. You can find out more about him at his own blog

(Photo courtesy of \!/_PeacePlusOne’s )


kt 2010/07/16 at 8:04 am

this greed because of major returns has never happened to me but it happens to those around me so many times. It happens because the unexpected returns cloud your judgement and you cannot seem to think beyond having more to spend than you expected. If it were to happen to me, i think i would be in better control of my emotions because of the fact that it never happens; i would get out when the getting is good

Jenna 2010/07/16 at 9:36 am

One time I was at a school auction and I was going back and forth is this other girl for a camera. I ended up winning a pretty cruddy camera. Definitely a good learning experience for me.

Khaleef @ KNS Financial 2010/07/16 at 10:07 am

Very good article! I think that this irrational greed tends to take over in many walks of life. Especially when they believe that they delude themselves into thinking that things will continue at the current pace forever. It seems like every 10 years we see this irrational thinking lead to some sort of bubble and resulting crisis!

Greg McFarlane 2010/07/16 at 1:22 pm

I’m not sure how gameplay works on “Deal or No Deal” (reading the Wikipedia entry didn’t help), but it seems that the game is pure luck, zero skill. Theoretically, if the likelihood of getting the $2 million prize is greater than 10% when you already hold $198,000, it’s tempting to say that it seems like it’d be worth it to go for the big prize.

But a 100% chance of holding onto $198,000 is a bird in the hand. Unless you’re independently wealthy – and if you’re a contestant on a game show, you probably aren’t – you’ve got to take the money. This is the trap many gamblers get into: they rationalize that it’s somehow more OK to risk what they’ve won, than to risk what they entered the game with. If it’s in your possession, it’s not “the house’s money”. It’s your money.

Moneyedup 2010/07/17 at 10:06 pm

Adrenaline might have something to do with people risking it all on tv game shows. When you are on a roll and you are winning you don’t want to think about quitting the game and then regretting not playing all the way through. I did see an episode of Deal or No Deal where a man took the deal at about $25 000. He still had some of the bigger amounts out there but he chose to stop the game. He explained that he had plans for the money and it meant a lot to his family. They ended up playing the game through after he left with the money and it turns out he made a very wise choice as he would have lost the game in the end. It still shows a lot of restraint and good strategy to stop when he was ahead though!.

kevin 2010/07/19 at 8:46 am

kt – when things are breaking our way it takes discipline and life’s experience to realize we aren’t invincible, no matter how good things may look at the moment. Good for you if you never fell into the trap–which is what it really is!

Jenna – that experience may have benefited you later in life in ways that are hard to see. Chance is not a reliable traveling partner, and the sooner in life we abandon it as any sort of viable strategy, the better off we’ll be. I suspect you found this out early.

Khaleef – What you hit on with “they delude themselves into thinking that things will continue at the current pace forever” is the crux of the matter in my thinking. When things are rolling, we tend to forget past experiences and convince ourselves that we’ve entered a new paradigm. This might center around an excessive belief in luck or karma – I wouldn’t trust either!

Greg – You’ve captured the psychology well. You make a good point about percentages, however I think that with gameshows as with gambling, the house will always win so percentages aren’t as random or as certain as we might like to believe. I’d take the money. Always.

Moneyedup – You’re describing the game show persona that takes over; maybe it’s akin to the reality shows where people get on TV then humiliate themselves with behavior and disclosures that shouldn’t be made. I’ve heard that having a camera rolling on you DOES change your behavior. I’ll do my best to avoid it;-)

Denise 2010/07/20 at 1:10 pm

Greed is a scary thing. It’s not money that’s the root of all evil, but the LOVE of MONEY that’s the devil!

Greg McFarlane 2010/07/20 at 1:14 pm

Apparently Denise and I have been reading the same Chick Publications comics.

Kevin 2010/07/21 at 7:36 pm

Greg – that didn’t originate in Chick Publications comics; the love of money as the root of all evil is actually biblical. The coloquialized abreviation “money is the root of all evil” was never acurate even though it’s gotten a lot more press.

I do think that’s the driver here though.

Budgeting in the Fun Stuff 2010/07/20 at 1:18 pm

I’m with you on Deal or No Deal…I’ve seen the show a few times and always would end up walking away with $50,000-$125,000. And I’d be very happy with that.

Out here in the real world, I am sure psychology has gotten in the way once or twice…I can’t think of any actual examples right this second, but I’m sure I’ve passed up great deals without even knowing it. On big decisions, like the mortgage rate we got in 2007, I shopped around like a crazy person and jumped at the fist rate that beat the rest by .25…we ended up with 5.375% and that’s worked out well for us. I looked into refinancing, but TX closing costs would have eaten the benefit. 🙁

Kevin 2010/07/21 at 7:41 pm

Budgeting – I agree, even with rates down well into the 4s, 5.375 will be hard to beat if you work closing costs into the mix. Sometimes the best thing to do is to keep the loan you have and just keep paying it down. You’re probably a few years into the current loan so putting any estimated closing costs you would pay toward a refi as a prepayment on your mortgage may be the best course of action.

I saw a lot of people reset loans with 24 or 25 years remaining back to 30 years, and while they may have lowered their monthly payment, they’d add 5-6 years to the back end–it would take a lot of reduced monthly payments to offset that! I know there’s always a deep seated urge to take some sort of action to speed up the process, but sometimes the best course of action is to stay your current course and pay it off as soon as possible.

Budgeting in the Fun Stuff 2010/07/22 at 12:36 pm


We’ve been prepaying our $740 15-year mortgage with a $900 payment since we got it in 2007. We are currently 7 1/2 years or less from paying it off. Refinancing would have reset it to 15 years at a lower monthly payment, but we would have still paid $900 a month and paid it off a few months earlier than now. BUT, the amount we would have saved via payments was eaten by the amount for closing costs. Since we don’t mind a $740 mortgage and don’t need the extra breathing room every month, the hassle would not have been worth it to us.

Oh, well…we’re just going to start putting “extra” money (the money we have left after our savings goals and expenses) at the end of every month towards the mortgage and pay it off in about 6 years instead. 🙂

James 2010/07/28 at 10:54 am

i have won/earned money in Vegas and in the stock market only to get greedy and let it slip away.

mentally it can be tough know when to walk away trust me i know first hand.

Kevin 2010/07/28 at 11:29 am

James – What is the thought process when you’re “up” that keeps you in the game?

Gobankingrates 2010/08/12 at 11:59 am

Personally, I can’t stand Deal or No Deal. Like you said, contestants consistently choose No Deal and come out with less money than they could have. Its just a lesson in the financial stupidity of the human mind.
But I liked how you applied this thought process to other things too. Very thought provoking!

[email protected] 2010/08/12 at 12:30 pm

Gobankingrates – I’ve often thought that they have them sign a waiver before going on the show that they’ll play to the end no matter what. Either that or their promised a flat amount up front to play til the end. It may sound ridiculous but it is possible that the promoters of the show have determined that playing to the end is what viewers really want to see. But I’m guessing.

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