Does TPIR teach us to lower our WTP?

The "New" Price is Right premiered on CBS daytime television on September 4, 1972 with host Bob Barker. I remember watching the premier 30-minute episode on that Labor Day, time enough for three games (Any Number, Bonus Game and One Right Price), and the Showcase round.

To this day, I am a fan of the show, and have had dreams of becoming a contestant. In June 1984, I was commissioned as a 2nd Lieutenant in the U.S. Army, graduated from college, and was married in the same week. On our honeymoon the following week, my spouse Florentina Fingar and I attended a taping. I was in my dress greens and thought we had a great story to share to get the call to "Come On Down" from then announcer Johnny Olson. Unfortunately neither of us were picked, but we enjoyed the experience.

For 50-years now, the show has stayed true to its roots with four contestants who "come on down" to bid on "fabulous prizes" so they can advance to the stage and play a pricing game with current host, Drew Carey. Prices of the prizes are rounded to the nearest dollar of the manufacturer's suggested retail price (MSRP), and go to the contestant closest without going over. The key here is to ensure your Willingness to Pay (WTP) is always below the MSRP, or you cannot win.

The game theory to advance includes:

• Bidding $1 above the previous high bid, maximizes the spread of the bid to the MSRP.
• Bidding $1 above a spread of two bids vs. the middle. For example, Joan bids $1000, Joe bids $1200. If you feel the MSRP is in-between these two bids, you would have a higher win percentage of bidding $1001 vs. $1100 .
• Bidding $1 if all others have overbid the MSRP.

Another example of TPIR lowering WTP is the game "That's Too Much!" Normally the prize is a new vehicle, the host presents price points that increase one at a time, and the contestant (with help from the audience) finally yells "That's Too Much!" when they feel the current price point exceeds the MSRP. This is one of the most difficult games to win because too often they will stop too soon, or not soon enough.

The Showcase Showdown wheel was introduced in 1975 when the show expanded to a full hour. The prior three contestants that were on-stage spin the "Big Wheel" which has values of five cents to $1, in five cent intervals. The objective is to get closest to $1 in one or two spins without going over. If you get $1 exactly, you win $1,000, and get a bonus spin to try and win $10,000 or for another $1 spin, $25,000. A?paper?published in the?Economic Journal?in 2002 by Rafael Tenorio of DePaul University and Timothy Cason of Purdue University found that contestants “under-spin” by not using their second spin. As explained in the study:

-The first contestant should spin again if they have 65￠ or less.

-The second contestant should spin again if they are a) behind player one, b) ahead of player one but have less than 50￠, or c) are tied with player one but have less than 65￠.

-The final contestant (who has the benefit of knowing all the previous players’ actions) needs to spin again if they are not in the lead or are tied with one of the other contestants with a score of less than 50￠. (If the contestant has more than 50￠ and is in a tie, they are better off pressing their luck in the one-spin tiebreaker.

Finally, the Showcase Round pits the winners of the two Showcase Showdowns on a group of higher value prizes. Bidding on the second Showcase can gain an advantage, but game theory for this round supports lowering WTP because if you overbid, you cannot win. Nothing disappoints me and the audience more than a double overbid of the Showcase MSRPs.

Bottom Line

The key to many of The Price Is Right games is to ensure you lower your WTP, because if you overbid, you cannot win. And remember, "Help control the pet population. Don't forget to get your pet spayed or neutered."

What are your thoughts about The Price is Right lowering our WTP?