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The "Gambler's Fallacy" in Lottery Play

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Author Info
Charles T. Clotfelter
Philip J. Cook

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Abstract

The -gambler's fallacy- is the belief that the probability of an event is lowered when that event has recently occurred, even though the probability of the event is objectively known to be independent from one trial to the next. This paper provides evidence on the time pattern of lottery participation to see whether actual behavior is consistent with this fallacy. Using data from the Maryland daily numbers game, we find a clear and consistent tendency for the amount of money bet on a particular number to fall sharply immediately after it is drawn, and then gradually to recover to its former level over the course of several months. This pattern is consistent with the hypothesis that lottery players are in fact subject to the gambler?s fallacy.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3769.

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Date of creation: Jul 1991
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Handle: RePEc:nbr:nberwo:3769

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  1. Siebenmorgen, Niklas & Weber, Martin, 2000. "The Influence of Different Investment Horizons on Risk Behavior," Sonderforschungsbereich 504 Publications 00-48, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  2. Melissa S. Kearney, 2005. "The Economic Winners and Losers of Legalized Gambling," NBER Working Papers 11234, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Gerlinde Fellner & Matthias Sutter, 2005. "Causes, consequences, and cures of myopic loss aversion - An experimental investigation," Papers on Strategic Interaction 2005-15, Max Planck Institute of Economics, Strategic Interaction Group. [Downloadable!]
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  4. Rabin, Matthew & Vayanos, Dimitri, 2007. "The Gambler's and Hot-Hand Fallacies: Theory and Applications," CEPR Discussion Papers 6081, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  5. Matthew Rabin., 2000. "Inference by Believers in the Law of Small Numbers," Economics Working Papers E00-282, University of California at Berkeley. [Downloadable!]
  6. 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!]
  7. Matthew Rabin, 2000. "Inference by Believers in the Law of Small Numbers," Department of Economics, Working Paper Series 1031, Department of Economics, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
  8. Les Coleman, 2004. "New light on the longshot bias," Applied Economics, Taylor and Francis Journals, vol. 36(4), pages 315-326, March. [Downloadable!] (restricted)
  9. Matthew Rabin, 2001. "Inference by Believers in the Law of Small Numbers," Method and Hist of Econ Thought 0012002, EconWPA. [Downloadable!]
  10. George Papachristou, 2004. "The British gambler's fallacy," Applied Economics, Taylor and Francis Journals, vol. 36(18), pages 2073-2077, October. [Downloadable!] (restricted)
  11. Jonathan Guryan & Melissa S. Kearney, 2005. "Lucky Stores, Gambling, and Addiction: Empirical Evidence from State Lottery Sales," NBER Working Papers 11287, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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