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The Gambler’s Fallacy and the Hot Hand: Empirical Data from Casinos

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Author Info
Rachel Croson ()
James Sundali ()

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Abstract

Research on decision making under uncertainty demonstrates that intuitive ideas of randomness depart systematically from the laws of chance. Two such departures involving random sequences of events have been documented in the laboratory, the gambler’s fallacy and the hot hand. This study presents results from the field, using videotapes of patrons gambling in a casino, to examine the existence and extent of these biases in naturalistic settings. We find small but significant biases in our population, consistent with those observed in the lab. Copyright Springer Science + Business Media, Inc. 2005

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File URL: http://hdl.handle.net/10.1007/s11166-005-1153-2
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Publisher Info
Article provided by Springer in its journal Journal of Risk and Uncertainty.

Volume (Year): 30 (2005)
Issue (Month): 3 (May)
Pages: 195-209
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:kap:jrisku:v:30:y:2005:i:3:p:195-209

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Related research
Keywords: perceptions of randomness; uncertainty; field study;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Terrell, Dek, 1998. "Biases in Assessments of Probabilities: New Evidence from Greyhound Races," Journal of Risk and Uncertainty, Springer, vol. 17(2), pages 151-66, November. [Downloadable!] (restricted)
  2. James Sundali & Rachel Croson, 2006. "Biases in casino betting: The hot hand and the gambler's fallacy," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 1, pages 1-12, July. [Downloadable!]
  3. Terrance Odean, 1998. "Are Investors Reluctant to Realize Their Losses?," Journal of Finance, American Finance Association, vol. 53(5), pages 1775-1798, October. [Downloadable!] (restricted)
  4. Clotfelter, Charles T & Cook, Philip J, 1991. " Lotteries in the Real World," Journal of Risk and Uncertainty, Springer, vol. 4(3), pages 227-32, July.
  5. Erik R. Sirri & Peter Tufano, 1998. "Costly Search and Mutual Fund Flows," Journal of Finance, American Finance Association, vol. 53(5), pages 1589-1622, October. [Downloadable!] (restricted)
  6. Shefrin, Hersh & Statman, Meir, 1985. " The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence," Journal of Finance, American Finance Association, vol. 40(3), pages 777-90, July. [Downloadable!] (restricted)
  7. Quandt, Richard E, 1986. "Betting and Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 201-07, February. [Downloadable!] (restricted)
  8. Matthew Rabin, 2002. "Inference By Believers In The Law Of Small Numbers," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 775-816, August. [Downloadable!] (restricted)
  9. Ritov, Ilana & Baron, Jonathan, 1992. " Status-Quo and Omission Biases," Journal of Risk and Uncertainty, Springer, vol. 5(1), pages 49-61, February.
  10. Samuelson, William & Zeckhauser, Richard, 1988. " Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
  11. Terrell, Dek & Farmer, Amy, 1996. "Optimal Betting and Efficiency in Parimutuel Betting Markets with Information Costs," Economic Journal, Royal Economic Society, vol. 106(437), pages 846-68, July. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Dohmen Thomas & Falk Armin & Huffman David & Marklein Felix & Sunde Uwe, 2008. "Biased Probability Judgment: Representative Evidence for Pervasiveness and Economic Outcomes," Research Memoranda 008, Maastricht : ROA, Research Centre for Education and the Labour Market. [Downloadable!]
  2. James Sundali & Rachel Croson, 2006. "Biases in casino betting: The hot hand and the gambler's fallacy," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 1, pages 1-12, July. [Downloadable!]
  3. Erte Xiao & Daniel Houser, 2006. "Public Implementation Eliminates Detrimental Effects of Punishment on Human Cooperation," IZA Discussion Papers 1977, Institute for the Study of Labor (IZA). [Downloadable!]
  4. David Bruner & Michael McKee & Rudy Santore, 2008. "Hand in the Cookie Jar: An Experimental Investigation of Equity-based Compensation and Managerial Fraud," Working Papers 08-05, Department of Economics, Appalachian State University. [Downloadable!]
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