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

Author Info

Listed author(s):
  • Rachel Croson

    ()

  • James Sundali

    ()

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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Article provided by Springer in its journal Journal of Risk and Uncertainty.

Volume (Year): 30 (2005)
Issue (Month): 3 (May)
Pages: 195-209

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Handle: RePEc:kap:jrisku:v:30:y:2005:i:3:p:195-209
DOI: 10.1007/s11166-005-1153-2
Contact details of provider: Web page: http://www.springer.com

Order Information: Web: http://www.springer.com/economics/economic+theory/journal/11166/PS2

Keywords: perceptions of randomness; uncertainty; field study;

References listed on IDEAS
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  1. Richard E. Quandt, 1986. "Betting and Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 101(1), pages 201-207.
  2. Charles T. Clotfelter & Philip J. Cook, 1991. "The "Gambler's Fallacy" in Lottery Play," NBER Working Papers 3769, National Bureau of Economic Research, Inc.
  3. Charles T. Clotfelter & Philip J. Cook, 1989. "Selling Hope: State Lotteries in America," NBER Books, National Bureau of Economic Research, Inc, number clot89-1.
  4. Brown, William O & Sauer, Raymond D, 1993. "Does the Basketball Market Believe in the Hot Hand? Comment," American Economic Review, American Economic Association, vol. 83(5), pages 1377-1386, December.
  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.
  6. Mark Walker & John Wooders, 2001. "Minimax Play at Wimbledon," American Economic Review, American Economic Association, vol. 91(5), pages 1521-1538, December.
  7. Matthew Rabin, 2002. "Inference by Believers in the Law of Small Numbers," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 775-816.
  8. 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.
  9. Terrance Odean, 1998. "Are Investors Reluctant to Realize Their Losses?," Journal of Finance, American Finance Association, vol. 53(5), pages 1775-1798, October.
  10. 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 846-868, July.
  11. Camerer, Colin, 1996. "Can Asset Markets be Manipulated? A Field Experiment with Racetrack Betting," Working Papers 983, California Institute of Technology, Division of the Humanities and Social Sciences.
  12. Samuelson, William & Zeckhauser, Richard, 1988. "Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
  13. Terrell, Dek, 1998. "Biases in Assessments of Probabilities: New Evidence from Greyhound Races," Journal of Risk and Uncertainty, Springer, vol. 17(2), pages 151-166, November.
  14. Clotfelter, Charles T & Cook, Philip J, 1991. "Lotteries in the Real World," Journal of Risk and Uncertainty, Springer, vol. 4(3), pages 227-232, July.
  15. 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 777-790, July.
  16. Ritov, Ilana & Baron, Jonathan, 1992. "Status-Quo and Omission Biases," Journal of Risk and Uncertainty, Springer, vol. 5(1), pages 49-61, February.
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RePEc Biblio mentions

As found on the RePEc Biblio, the curated bibliography for Economics:
  1. > Industrial Organization > Industry studies > Sports, recreation and tourism > Gambling
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