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Predicting Lotto Numbers

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  • Jørgensen, Claus Bjørn
  • Suetens, Sigrid
  • Tyran, Jean-Robert

Abstract

We investigate the "law of small numbers" using a unique panel data set on lotto gambling. Because we can track individual players over time, we can measure how they react to outcomes of recent lotto drawings. We can therefore test whether they behave as if they believe they can predict lotto numbers based on recent drawings. While most players pick the same set of numbers week after week without regards of numbers drawn or anything else, we find that those who do change, act on average in the way predicted by the law of small numbers as formalized in recent behavioral theory. In particular, on average they move away from numbers that have recently been drawn, as suggested by the "gambler’s fallacy," and move toward numbers that are on streak, i.e. have been drawn several weeks in a row, consistent with the "hot hand fallacy."

Suggested Citation

  • Jørgensen, Claus Bjørn & Suetens, Sigrid & Tyran, Jean-Robert, 2011. "Predicting Lotto Numbers," CEPR Discussion Papers 8314, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8314
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    References listed on IDEAS

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    1. Suetens, Sigrid & Tyran, Jean-Robert, 2012. "The gambler's fallacy and gender," Journal of Economic Behavior & Organization, Elsevier, vol. 83(1), pages 118-124.
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    3. Alok Kumar, 2009. "Who Gambles in the Stock Market?," Journal of Finance, American Finance Association, vol. 64(4), pages 1889-1933, August.
    4. Elena Asparouhova & Michael Hertzel & Michael Lemmon, 2009. "Inference from Streaks in Random Outcomes: Experimental Evidence on Beliefs in Regime Shifting and the Law of Small Numbers," Management Science, INFORMS, vol. 55(11), pages 1766-1782, November.
    5. 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.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. As expected, lottery players are not rational
      by Economic Logician in Economic Logic on 2011-05-05 19:15:00

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    Cited by:

    1. Raman Kachurka & Michał Wiktor Krawczyk, 2020. "Lottery "strategies": monetizing players' behavioral biases," Working Papers 2020-29, Faculty of Economic Sciences, University of Warsaw.
    2. 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.
    3. Wolff, Irenaeus, 2021. "The lottery player’s fallacy: Why labels predict strategic choices," Journal of Economic Behavior & Organization, Elsevier, vol. 184(C), pages 16-29.
    4. Neszveda, G., 2019. "Essays on behavioral finance," Other publications TiSEM 05059039-5236-42a3-be1b-3, Tilburg University, School of Economics and Management.
    5. Ian Walker & Rhys Wheeler, 2018. "The Decline and Fall of UK Lotto," Working Papers 247054751, Lancaster University Management School, Economics Department.
    6. Powdthavee, Nattavudh & Riyanto, Yohanes E., 2012. "Why Do People Pay for Useless Advice? Implications of Gambler's and Hot-Hand Fallacies in False-Expert Setting," IZA Discussion Papers 6557, Institute of Labor Economics (IZA).
    7. Michał Wiktor Krawczyk & Joanna Rachubik, 2019. "The representativeness heuristic and the choice of lottery tickets: A field experiment," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 14(1), pages 51-57, January.
    8. Daniel J. Benjamin, 2018. "Errors in Probabilistic Reasoning and Judgment Biases," NBER Working Papers 25200, National Bureau of Economic Research, Inc.
    9. 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.
    10. Clingingsmith, David & Sheremeta, Roman M, 2017. "Status and Economic Rent: Experimental Evidence on the Matthew Effect," SocArXiv evwpa, Center for Open Science.
    11. Miller, Joshua Benjamin & Sanjurjo, Adam, 2018. "A Visible (Hot) Hand? Expert Players Bet on the Hot Hand and Win," OSF Preprints sd32u, Center for Open Science.
    12. Suetens, Sigrid & Tyran, Jean-Robert, 2012. "The gambler's fallacy and gender," Journal of Economic Behavior & Organization, Elsevier, vol. 83(1), pages 118-124.
    13. Miller, Joshua Benjamin & Sanjurjo, Adam, 2018. "Is it a Fallacy to Believe in the Hot Hand in the NBA Three-Point Contest?," OSF Preprints dmksp, Center for Open Science.
    14. Nattavudh Powdthavee & Yohanes E. Riyanto, 2012. "Why Do People Pay for Useless Advice?," CEP Discussion Papers dp1153, Centre for Economic Performance, LSE.
    15. Andrikogiannopoulou, Angie & Papakonstantinou, Filippos, 2017. "Individual reaction to past performance sequences: evidence from a real marketplace," LSE Research Online Documents on Economics 87997, London School of Economics and Political Science, LSE Library.
    16. Pelster, Matthias, 2020. "The gambler’s and hot-hand fallacies: Empirical evidence from trading data," Economics Letters, Elsevier, vol. 187(C).
    17. Ibrahim Filiz & Thomas Nahmer & Markus Spiwoks & Kilian Bizer, 2018. "Portfolio diversification: the influence of herding, status-quo bias, and the gambler’s fallacy," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 32(2), pages 167-205, May.
    18. Michal Krawczyk & Joanna Rachubik, 2018. "Verifying the representativeness heuristic: A field experiment with real-life lottery tickets," Natural Field Experiments 00699, The Field Experiments Website.
    19. Karsten Hueffer & Miguel A. Fonseca & Anthony Leiserowitz & Karen M. Taylor, 2013. "The wisdom of crowds: Predicting a weather and climate-related event," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 8(2), pages 91-105, March.
    20. Joshua B. Miller & Adam Sanjurjo, 2014. "A Cold Shower for the Hot Hand Fallacy," Working Papers 518, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    21. Kevin He, 2018. "Mislearning from Censored Data: The Gambler's Fallacy and Other Correlational Mistakes in Optimal-Stopping Problems," Papers 1803.08170, arXiv.org, revised Aug 2021.
    22. Miller, Joshua B. & Sanjurjo, Adam, 2021. "Is it a fallacy to believe in the hot hand in the NBA three-point contest?," European Economic Review, Elsevier, vol. 138(C).
    23. Ala Avoyan & Robizon Khubulashvili & Giorgi Mekerishvili, 2020. "Call It a Day: History Dependent Stopping Behavior," CESifo Working Paper Series 8603, CESifo.
    24. Oluwaseun A. Otekunrin & Adesola G. Folorunso & Kehinde O. Alawode, 2021. "Number preferences in selected Nigerian lottery games," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 16(4), pages 1060-1071, July.
    25. Shrestha, Maheshwor, 2019. "Death scares: How potential work-migrants infer mortality rates from migrant deaths," Journal of Development Economics, Elsevier, vol. 141(C).

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    More about this item

    Keywords

    gambler's fallacy; hot hand fallacy; law of small numbers; representativeness;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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