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The cross-sectional "Gambler's Fallacy": Set representativeness in lottery number choices
Lien,Jaimie W.1; Yuan,Jia2
Source PublicationJournal of Economic Behavior and Organization

Traditionally, the Gambler's Fallacy is described as the belief that a sequence of independent outcomes over time should exhibit short-run reversals. The underlying psychological bias thought to drive this fallacy is Representativeness Bias: the idea that even a small sample of outcomes should closely reflect the theoretical probability distribution (. Tversky and Kahneman, 1971). Yet representativeness also has less commonly explored consequences in the cross-sectional dimension. We find strong evidence for this in lottery play where probabilities are well-defined and transparent, using a dataset of over 1.6 million lottery tickets purchased by over 28,000 players. Specifically, individuals prefer number combinations that are cross-sectionally representative of the uniform distribution from which they are drawn. We test two possible approaches to implementing representativeness; a heuristic 3-bin approach which is promoted in some gambling advice literature, and a direct optimization approach in which gamblers try to spread the numbers in the chosen set as evenly as possible across the lottery number range. By both measures, gamblers over-gravitated to highly representative lottery number sets and over-avoided less representative sets, compared to the proportions that the true lottery odds would suggest. In this pari-mutuel lottery setting, a cost is incurred by gamblers with this type of bias, by reducing their expected winnings.

KeywordBelief Biases Gambler's Fallacy Lottery Gambling Representativeness Bias
URLView the original
Indexed BySSCI ; SSCI
WOS Research AreaBusiness & Economics
WOS SubjectEconomics
WOS IDWOS:000349502700012
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Cited Times [WOS]:3   [WOS Record]     [Related Records in WOS]
Document TypeJournal article
Corresponding AuthorLien,Jaimie W.
Affiliation1.Department of Economics,School of Economics and Management,Tsinghua University,,China
2.Department of Business Economics,Faculty of Business Administration,University of Macau,,Macao
Recommended Citation
GB/T 7714
Lien,Jaimie W.,Yuan,Jia. The cross-sectional "Gambler's Fallacy": Set representativeness in lottery number choices[J]. Journal of Economic Behavior and Organization,2015,109:163-172.
APA Lien,Jaimie W.,&Yuan,Jia.(2015).The cross-sectional "Gambler's Fallacy": Set representativeness in lottery number choices.Journal of Economic Behavior and Organization,109,163-172.
MLA Lien,Jaimie W.,et al."The cross-sectional "Gambler's Fallacy": Set representativeness in lottery number choices".Journal of Economic Behavior and Organization 109(2015):163-172.
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