Rationality and the ‘price is right’

The television game show ‘The Price Is Right’ offers a unique laboratory for observing decision making behavior because rewards are much higher than those encountered in a typical economics experiment and because of the substantial opportunity which contestants have for formulating their strategies. Analysis of contestant behavior substantiates (1) the persistence of decision making errors despite the penalties associated with such errors, and despite the existence of simple strategy which outperforms contestants' behavior and (2) that learning drives competitors toward more effective behavior.