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Predicting Lotto Numbers

  • Claus Bjørn Jørgensen

    (Department of Economics, University of Copenhagen)

  • Sigrid Suetens

    (Tilburg University)

  • Jean-Robert Tyran

    (Department of Economics, University of Vienna)

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”.

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File URL: http://www.econ.ku.dk/english/research/publications/wp/dp_2011/1110.pdf/
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Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 11-10.

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Length: 25 pages
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:kud:kuiedp:1110
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Web page: http://www.econ.ku.dk
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  1. Matthew Rabin., 2000. "Inference by Believers in the Law of Small Numbers," Economics Working Papers E00-282, University of California at Berkeley.
  2. Rachel Croson & James Sundali, 2005. "The Gambler’s Fallacy and the Hot Hand: Empirical Data from Casinos," Journal of Risk and Uncertainty, Springer, vol. 30(3), pages 195-209, May.
  3. Alok Kumar, 2009. "Who Gambles in the Stock Market?," Journal of Finance, American Finance Association, vol. 64(4), pages 1889-1933, 08.
  4. Muriel Niederle & Lise Vesterlund, 2005. "Do Women Shy Away from Competition? Do Men Compete too Much?," Discussion Papers 04-030, Stanford Institute for Economic Policy Research.
  5. Theo Offerman & Joep Sonnemans, 2004. "What's Causing Overreaction? An Experimental Investigation of Recency and the Hot-hand Effect," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(3), pages 533-554, October.
  6. Suetens, Sigrid & Tyran, Jean-Robert, 2012. "The gambler's fallacy and gender," Journal of Economic Behavior & Organization, Elsevier, vol. 83(1), pages 118-124.
  7. 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.
  8. Camerer, Colin F, 1989. "Does the Basketball Market Believe in the 'Hot Hand'?," American Economic Review, American Economic Association, vol. 79(5), pages 1257-61, December.
  9. Terrell, Dek, 1994. "A Test of the Gambler's Fallacy: Evidence from Pari-mutuel Games," Journal of Risk and Uncertainty, Springer, vol. 8(3), pages 309-17, May.
  10. repec:dgr:kubcen:2011011 is not listed on IDEAS
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