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Breaking Down The 'Deal'

Breaking Down The 'Deal'Tufts senior and Summer Scholar Mickey Ferri is putting the hit NBC show "Deal or No Deal" under the microscope in a study of risk behavior.

Medford/Somerville, Mass. [06.19.06] Mickey Ferri has calculated his share of supply-demand curves. He's analyzed the opportunity costs of the farmer deciding whether to grow potatoes or raise cows. And he can figure per capita gross domestic product (GDP) in his sleep.

Now the rising senior is taking his academic interests someplace new, and adding another acronym to his economics-major vernacular in the process: NBC.

As one of Tufts' 50 Summer Scholars, Ferri is conducting an analysis of risk behavior in the network's new hit game show "Deal or No Deal." In the game, contestants choose one of several briefcases that contain amounts ranging from one penny to $1 million and, without knowing the amount inside, bargain with a "banker" to get the best possible deal.

A show that requires no real strategy, and even less skill, "Deal or No Deal" is a perfect storm of wide-ranging stakes, eager participants, and 39 episodes of recorded and readily available data. In other words, it's an ideal experiment.

Applying the economic principle of risk aversion-which states that people avoid risk whenever possible, and will even accept a lower reward in return for reduced risk-Ferri is researching whether contestants' choices vary with age, race, family and financial status.

"Because we can isolate this risk variable, we can really see how risky people are," Ferri says. "And risk is an important topic in economics because in the real world, a lot of decisions are always uncertain-whether or not to invest in a certain company or whether to put your money in a relatively low-risk savings account, or whether you want to invest it in the stock market, which could crash and you could lose all your money. The assumption is that people don't like to take risks. "‘Deal or No Deal' provides us with the data that we need."

The project is shepherded by Economics Professor Lynne Pepall, whose expertise lies in the field of game theory. A valuable subject in economics, psychology, ethics and most social sciences, game theory is a branch of applied mathematics that examines behavior in response to certain incentives and opportunities to maximize individual returns. In other words, why people do what they do when they're looking out for No. 1

And there are few better incentives than briefcases stuffed with cash.

The wide range of possible payouts creates an interesting incentive structure that changes rapidly as briefcases are opened at each round, either exposing the ultimate prize or raising the stakes (and the ratings, NBC hopes) as the million-dollar briefcase remains undiscovered.

In addition to the options facing the show's contestants, Ferri's analysis will focus on another set of factors-those supplied by the network as it tries to hike up the tension level and ratings.

"They say on the show that the banker wants to walk away having given as little as possible, but I don't know if that's his true incentive - I think his incentive is to make the show as interesting as possible, and I think those will conflict," Ferri says. "If the contestant knows that the banker isn't really giving the minimum and is trying to make the show more interesting, that might give them an incentive to keep playing."

The study will be the first of its size in the United States, and is modeled after several international studies. The show has worldwide appeal, airing in over 30 countries-variations include "Done Deal" ( Argentina), "Take it or Leave it" ( France), and the "Hunting Millions" (the Netherlands)-and Ferri has several projects to reference.

According to Ferri, whose intellectual leanings have incorporated a bit more of the liberal arts than his triple math, economics and computer science majors would suggest, the project is exactly his brand of economics - the quantifying, graphing and analyzing of human behavior.

"The way I see it, economics is really a study of how people behave and why they behave that way," Ferri says. "Historically, much of economics has focused on the economy - understandably so, but I am more interested in studying how individual people behave," he continues, referencing Freakonomics, the 2005 book by Steven D. Levitt and Stephen A. Dubner that applies the economic principle of incentive structure and data analysis to such phenomena as cheating sumo wrestlers, the financial side of street gangs, and even the art of baby-naming.

In fusing his academic interests, Ferri is turning the tools of economics to the science of human behavior to discover what makes some people take risks and others quit while they're ahead. And in the process, he may finally provide a definitive answer, one backed by hard data, as to whether fortune really does favor the bold.

--Elizabeth Hoffman


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