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The price of luck: paying for the hot hand of others

Author

Listed:
  • Silvia Bou

    (Universitat Autònoma de Barcelona)

  • Jordi Brandts

    () (Instituto de Análisis Económico (CSIC) and Barcelona GSE)

  • Magda Cayón

    (Universitat Autònoma de Barcelona)

  • Pablo Guillén

    (The University of Sydney)

Abstract

Abstract We report on the results of an experiment with a statistical choice task involving the toss of a fair coin. In our experiment, participants had to decide whether they were willing to pay a price to switch from betting on the future performance of one player to betting on that of another player. The switch was from a player who had been previously less successful in betting on five coin flips to another one who had been more successful in the same task. We conducted a treatment with the Becker–DeGroot–Marschak mechanism and one in which participants were faced with a fixed price. In both cases, participants exhibit a strong bias towards placing their bets on players with a good guessing history in the coin toss task. Participants’ behaviour is compatible with prescriptive luck beliefs, that is, the idea that luck is a somehow deterministic and personal attribute.

Suggested Citation

  • Silvia Bou & Jordi Brandts & Magda Cayón & Pablo Guillén, 2016. "The price of luck: paying for the hot hand of others," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 2(1), pages 60-72, May.
  • Handle: RePEc:spr:jesaex:v:2:y:2016:i:1:d:10.1007_s40881-016-0023-9 DOI: 10.1007/s40881-016-0023-9
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Decision heuristics; Cognitive bias; Economic experiments;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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