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Decision Making Under the Gambler’s Fallacy: Evidence from Asylum Judges, Loan Officers, and Baseball Umpires

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  • Daniel L. Chen
  • Tobias J. Moskowitz
  • Kelly Shue

Abstract

We find consistent evidence of negative autocorrelation in decision making that is unrelated to the merits of the cases considered in three separate high-stakes field settings: refugee asylum court decisions, loan application reviews, and Major League Baseball umpire pitch calls. The evidence is most consistent with the law of small numbers and the gambler’s fallacy—people underestimating the likelihood of sequential streaks occurring by chance—leading to negatively autocorrelated decisions that result in errors. The negative autocorrelation is stronger among more moderate and less experienced decision makers, following longer streaks of decisions in one direction, when the current and previous cases share similar characteristics or occur close in time, and when decision makers face weaker incentives for accuracy. Other explanations for negatively autocorrelated decisions such as quotas, learning, or preferences to treat all parties fairly are less consistent with the evidence, though we cannot completely rule out sequential contrast effects as an alternative explanation. JEL Codes: D03, D08, G02.

Suggested Citation

  • Daniel L. Chen & Tobias J. Moskowitz & Kelly Shue, 2016. "Decision Making Under the Gambler’s Fallacy: Evidence from Asylum Judges, Loan Officers, and Baseball Umpires," The Quarterly Journal of Economics, Oxford University Press, vol. 131(3), pages 1181-1242.
  • Handle: RePEc:oup:qjecon:v:131:y:2016:i:3:p:1181-1242.
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    File URL: http://hdl.handle.net/10.1093/qje/qjw017
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    References listed on IDEAS

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    Cited by:

    1. Chen, Daniel L. & Prescott, J.J., 2016. "Implicit Egoism in Sentencing Decisions: First Letter Name Effects with Randomly Assigned Defendants," IAST Working Papers 16-56, Institute for Advanced Study in Toulouse (IAST).
    2. Samuel M. Hartzmark & Kelly Shue, 2017. "A Tough Act to Follow: Contrast Effects In Financial Markets," NBER Working Papers 23883, National Bureau of Economic Research, Inc.
    3. repec:eee:finmar:v:40:y:2018:i:c:p:23-39 is not listed on IDEAS
    4. Alejandro Núñez Arroyo, 2018. "Information seeking with selective memory," Documentos CEDE 017131, Universidad de los Andes - CEDE.
    5. Neszveda, G., 2019. "Essays on behavioral finance," Other publications TiSEM 05059039-5236-42a3-be1b-3, Tilburg University, School of Economics and Management.
    6. Daniel J. Benjamin & Don A. Moore & Matthew Rabin, 2017. "Biased Beliefs About Random Samples: Evidence from Two Integrated Experiments," NBER Working Papers 23927, National Bureau of Economic Research, Inc.
    7. Chen, Daniel L. & Halberstam, Yosh & Yu, Alan, 2016. "Covering: Mutable Characteristics and Perceptions of Voice in the U.S. Supreme Court," TSE Working Papers 16-680, Toulouse School of Economics (TSE), revised Aug 2016.
    8. Daniel J. Benjamin & Don A. Moore & Matthew Rabin, 2018. "Biased Beliefs About Random Samples: Evidence from Two Integrated Experiments," GRU Working Paper Series GRU_2018_014, City University of Hong Kong, Department of Economics and Finance, Global Research Unit.
    9. Chen, Daniel L., 2016. "Sclerotization of the Judiciary: Judicial Exits from the U.S. Courts of Appeals are Politically Motivated," TSE Working Papers 16-721, Toulouse School of Economics (TSE), revised Feb 2017.
    10. Chen, Daniel L. & Dunn, Matt & Sagun, Levent & Sirin, Hale, 2017. "Early Predictability of Asylum Court Decisions," TSE Working Papers 17-781, Toulouse School of Economics (TSE).
    11. Carlos Berdejó & Daniel L. Chen, 2017. "Electoral Cycles among US Courts of Appeals Judges," Journal of Law and Economics, University of Chicago Press, vol. 60(3), pages 479-496.
    12. repec:kap:fmktpm:v:32:y:2018:i:2:d:10.1007_s11408-018-0311-x is not listed on IDEAS
    13. Chen, Daniel L., 2018. "Machine Learning and Rule of Law," TSE Working Papers 18-975, Toulouse School of Economics (TSE).
    14. repec:eee:irlaec:v:52:y:2017:i:c:p:1-15 is not listed on IDEAS
    15. Chen, Daniel L., 2016. "This Morning's Breakfast, Last Night's Game: Detecting Extraneous Factors in Judging," IAST Working Papers 16-49, Institute for Advanced Study in Toulouse (IAST).
    16. Chen, Daniel L., 2016. "Mood and the Malleability of Moral Reasoning," TSE Working Papers 16-707, Toulouse School of Economics (TSE), revised Feb 2017.
    17. Philippe, Arnaud, 2017. "Do jurors and professional judges differ in their treatment of crime?: Evidence from French reform," TSE Working Papers 17-763, Toulouse School of Economics (TSE).
    18. Doidge, Mary & Feng, Hongli & Hennessy, David A., 2017. "A test of the gambler’s and hot hand fallacies in farmers’ weather and market predictions," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258457, Agricultural and Applied Economics Association.
    19. Bindler, Anna & Hjalmarsson, Randi, 2018. "Path Dependency in Jury Decision-Making," CEPR Discussion Papers 13012, C.E.P.R. Discussion Papers.

    More about this item

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • K0 - Law and Economics - - General
    • Z2 - Other Special Topics - - Sports Economics

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