IDEAS home Printed from https://ideas.repec.org/p/tse/wpaper/30556.html
   My bibliography  Save this paper

Decision-Making Under the Gambler’s Fallacy: Evidence From Asylum Courts, Loan Officers, and Baseball Umpires

Author

Listed:
  • Chen, Daniel L.
  • Moskowitz, Tobias J.
  • Shue, Kelly

Abstract

We find consistent evidence of negative autocorrelation in decision-making that is unrelated to the merits of the cases considered in three separate high-stakes field settings: refugee asylum court decisions, loan application reviews, and major league baseball umpire pitch calls. The evidence is most consistent with the law of small numbers and the gambler's fallacy – people underestimating the likelihood of sequential streaks occurring by chance – leading to negatively autocorrelated decisions that result in errors. The negative autocorrelation is stronger among more moderate and less experienced decision-makers, following longer streaks of decisions in one direction, when the current and previous cases share similar characteristics or occur close in time, and when decision-makers face weaker incentives for accuracy. Other explanations for negatively autocorrelated decisions such as quotas, learning, or preferences to treat all parties fairly, are less consistent with the evidence, though we cannot completely rule out sequential contrast effects as an alternative explanation.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Chen, Daniel L. & Moskowitz, Tobias J. & Shue, Kelly, 2016. "Decision-Making Under the Gambler’s Fallacy: Evidence From Asylum Courts, Loan Officers, and Baseball Umpires," TSE Working Papers 16-674, Toulouse School of Economics (TSE).
  • Handle: RePEc:tse:wpaper:30556
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w22026.pdf
    File Function: Full text
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Matthew Rabin & Dimitri Vayanos, 2010. "The Gambler's and Hot-Hand Fallacies: Theory and Applications," Review of Economic Studies, Oxford University Press, vol. 77(2), pages 730-778.
    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. Shawn Cole & Martin Kanz & Leora Klapper, 2015. "Incentivizing Calculated Risk-Taking: Evidence from an Experiment with Commercial Bank Loan Officers," Journal of Finance, American Finance Association, vol. 70(2), pages 537-575, April.
    4. 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 309-317, May.
    5. Uri Simonsohn, 2006. "New Yorkers Commute More Everywhere: Contrast Effects in the Field," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 1-9, February.
    6. 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.
    7. Sendhil Mullainathan & Joshua Schwartzstein & Andrei Shleifer, 2008. "Coarse Thinking and Persuasion," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 577-619.
    8. 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.
    9. Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2015. "Salience Theory of Judicial Decisions," The Journal of Legal Studies, University of Chicago Press, vol. 44(S1), pages 7-33.
    10. Uri Simonsohn & George Loewenstein, 2006. "Mistake #37: The Effect of Previously Encountered Prices on Current Housing Demand," Economic Journal, Royal Economic Society, vol. 116(508), pages 175-199, January.
    11. Saurabh Bhargava & Ray Fisman, 2014. "Contrast Effects in Sequential Decisions: Evidence from Speed Dating," The Review of Economics and Statistics, MIT Press, vol. 96(3), pages 444-457, July.
    12. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • K0 - Law and Economics - - General
    • Z2 - Other Special Topics - - Sports Economics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tse:wpaper:30556. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/tsetofr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.