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Predicting Lotto Numbers

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Author Info

  • Jørgensen, Claus Bjørn
  • Suetens, Sigrid
  • Tyran, Jean-Robert

Abstract

We investigate the "law of small numbers" using a unique panel data set on lotto gambling. Because we can track individual players over time, we can measure how they react to outcomes of recent lotto drawings. We can therefore test whether they behave as if they believe they can predict lotto numbers based on recent drawings. While most players pick the same set of numbers week after week without regards of numbers drawn or anything else, we find that those who do change, act on average in the way predicted by the law of small numbers as formalized in recent behavioral theory. In particular, on average they move away from numbers that have recently been drawn, as suggested by the "gambler’s fallacy," and move toward numbers that are on streak, i.e. have been drawn several weeks in a row, consistent with the "hot hand fallacy."

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8314.

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Date of creation: Apr 2011
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Handle: RePEc:cpr:ceprdp:8314

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Related research

Keywords: gambler's fallacy; hot hand fallacy; law of small numbers; representativeness;

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References

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  1. Suetens, Sigrid & Tyran, Jean-Robert, 2012. "The gambler's fallacy and gender," Journal of Economic Behavior & Organization, Elsevier, vol. 83(1), pages 118-124.
  2. Muriel Niederle & Lise Vesterlund, 2007. "Do Women Shy Away from Competition? Do Men Compete Too Much?," The Quarterly Journal of Economics, MIT Press, vol. 122(3), pages 1067-1101, 08.
  3. Elena Asparouhova & Michael Hertzel & Michael Lemmon, 2009. "Inference from Streaks in Random Outcomes: Experimental Evidence on Beliefs in Regime Shifting and the Law of Small Numbers," Management Science, INFORMS, vol. 55(11), pages 1766-1782, November.
  4. Alok Kumar, 2009. "Who Gambles in the Stock Market?," Journal of Finance, American Finance Association, vol. 64(4), pages 1889-1933, 08.
  5. Matthew Rabin, 2001. "Inference by Believers in the Law of Small Numbers," Method and Hist of Econ Thought 0012002, EconWPA.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. As expected, lottery players are not rational
    by Economic Logician in Economic Logic on 2011-05-05 14:15:00
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Cited by:
  1. Nattavudh Powdthavee & Yohanes E. Riyanto, 2012. "Why Do People Pay for Useless Advice?," CEP Discussion Papers dp1153, Centre for Economic Performance, LSE.
  2. Suetens, S. & Tyran, J.R., 2011. "The Gambler's Fallacy and Gender," Discussion Paper 2011-011, Tilburg University, Center for Economic Research.
  3. Karsten Hueffer & Miguel A. Fonseca & Anthony Leiserowitz & Karen M. Taylor, 2013. "The wisdom of crowds: Predicting a weather and climate-related event," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 8(2), pages 91-105, March.
  4. Powdthavee, Nattavudh & Riyanto, Yohanes E., 2012. "Why Do People Pay for Useless Advice? Implications of Gambler's and Hot-Hand Fallacies in False-Expert Setting," IZA Discussion Papers 6557, Institute for the Study of Labor (IZA).

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