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Hot Hand and Gambler's Fallacy in Teams: Evidence from Investment Experiments

  • Thomas Stöckl


  • Jürgen Huber


  • Michael Kirchler


  • Florian Lindner


In laboratory experiments we explore the effects of communication and group decision making on investment behavior and on subjects’ proneness to behavioral biases. Most importantly, we show that communication and group decision making does not impact subjects’ overall proneness to biases like gambler’s fallacy and hot hand belief. However, groups decide differently than individuals as they rely significantly less on useless outside advice from “experts” and choose the risk-free option less frequently. Finally, we document gender differences in investment behavior: groups of two female subjects choose the risk-free investment more often and are slightly more prone to the hot hand belief than groups of two male subjects.

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Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2013-04.

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Length: 39
Date of creation: Jan 2013
Date of revision:
Handle: RePEc:inn:wpaper:2013-04
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  9. Blinder, Alan S & Morgan, John, 2005. "Are Two Heads Better than One? Monetary Policy by Committee," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(5), pages 789-811, October.
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  11. Roman M. Sheremeta & Jingjing Zhang, 2009. "Can Groups Solve the Problem of Overbidding in Contests?," Department of Economics Working Papers 2009-05, McMaster University.
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  15. Sutter, Matthias, 2007. "Are teams prone to myopic loss aversion? An experimental study on individual versus team investment behavior," Economics Letters, Elsevier, vol. 97(2), pages 128-132, November.
  16. Marco Casari & Jingjing Zhang & Christine Jackson, 2010. "When do groups perform better than individuals? A company takeover experiment," IEW - Working Papers 504, Institute for Empirical Research in Economics - University of Zurich, revised Apr 2012.
  17. Charness, Gary B & Karni, Edi, 2007. "Individual and Group Decision Making Under Risk: An Experimental Study of Bayesian Updating and Violations of First-order Stochastic Dominance," University of California at Santa Barbara, Economics Working Paper Series qt4gr7j8z8, Department of Economics, UC Santa Barbara.
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