Operations, Information and Decisions Papers

Document Type

Journal Article

Date of this Version

7-2006

Publication Source

Judgement and Decision Making

Volume

1

Issue

1

Start Page

1

Last Page

12

Abstract

We examine two departures of individual perceptions of randomness from probability theory: the hot hand and the gambler’s fallacy, and their respective opposites. This paper’s first contribution is to use data from the field (individuals playing roulette in a casino) to demonstrate the existence and impact of these biases that have been previously documented in the lab. Decisions in the field are consistent with biased beliefs, although we observe significant individual heterogeneity in the population. A second contribution is to separately identify these biases within a given individual, then to examine their within-person correlation. We find a positive and significant correlation across individuals between hot hand and gambler’s fallacy biases, suggesting a common (root) cause of the two related errors. We speculate as to the source of this correlation (locus of control), and suggest future research which could test this speculation.

Keywords

judgment and decision making, hot hand, gambler’s fallacy, casino betting, field data, roulette

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Date Posted: 27 November 2017

This document has been peer reviewed.