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The cross-sectional "Gambler's Fallacy": Set representativeness in lottery number choices
Lien,Jaimie W.1; Yuan,Jia2
2015
Source PublicationJournal of Economic Behavior and Organization
ISSN01672681
Volume109Pages:163-172
Abstract

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
DOI10.1016/j.jebo.2014.10.011
URLView the original
Indexed BySSCI ; SSCI
Language英语
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
CollectionDEPARTMENT OF FINANCE AND BUSINESS ECONOMICS
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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