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The influence of subjective beliefs in luck on the decision-making under risk: TV show analysis

Author

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  • Dolgikh, Sofiia

    (National Research University Higher School of Economics (NRU HSE). Moscow, Russian Federation)

Abstract

This paper investigates into the questions of subjective beliefs in luck evaluation and their influence on the individual behavior. Based on the TV show «Deal or Not a Deal» participants behavioral data decision making under risk model with subjective probabilities has been provided. Model parameters are estimated via nonlinear binary regression with heteroscedastic random error. The results are as follows. First, there is statistical evidence that individuals subjective believes in luck influence their decision making. Second, risk-aversion parameters estimates may be strongly biased when parameters responsible for luck evaluation are omitted. Third, hot hand fallacy effect has been revealed: according to model parameters estimates lucky (unlucky) events make people think themselves as luckier (unluckier) persons. These results robustness has been shown by the means of model parameters reevaluation under different random error distribution assumption and sample division according to gender and education level.

Suggested Citation

  • Dolgikh, Sofiia, 2019. "The influence of subjective beliefs in luck on the decision-making under risk: TV show analysis," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 56, pages 74-98.
  • Handle: RePEc:ris:apltrx:0382
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    More about this item

    Keywords

    decision-making; expected utility theory; prospect theory; luck; hot hand fallacy; gambler’s fallacy.;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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