Distinguishing between random and nonrandom events.

Abstract

Subjects judged whether binary strings had been generated by a random or a noarandom process. Half of the strings were generated by a Bernoulli process with p ~ .5. The other half were generated by either a repetition-biased process or an alternation-biased process. Subjects were (a) not informed about the nonrandom process, (b) informed about the qualitative nature of the process, or (c) given accurate feedback after each trial about the generating process. The data show that subjects equate long runs and symmetry with nonrandomness, and high rates of alternation with randomness, making them less successful in detecting alternation-biased processes. The data also show that performance can be improved by instructions or feedback. A second experiment using statistically sophisticated subjects showed that although they perform better than naive subjects, their data are similar qualitatively. We interpret these results in terms of whether the subject must perform the task in a null hypothesis mode or a maximum likelihood mode.

The hot hand fallacy and the gambler’s fallacy: Two faces of subjective randomness?

“…The recency expectations are not symmetrical; sequences with zero recency (alternation rate of .5) were attributed to human skilled performance rather than inanimate chance. Studies of perceived randomness (e.g., Falk, 1975Falk, , 1981Gilovich et al, 1985;Lopes & Oden, 1987) also show that alternation rates of .5 are not judged as random. The precise contribution of the differing expectations for each type of sequence to the judgments studied here remains to be determined; plainly though, and in keeping with our account of the gambler's fallacy and the hot hand fallacy, people have distinct prior expectations for the characteristic recency associated with different classes of processes generating sequential outputs.…”

“…Under these circumstances, expectations with negative recency have some validity because observing a particular outcome lowers the chances of observing that outcome the next time. Accordingly, a number of authors have suggested that the experience of negative recency in life might be responsible for the gambler's fallacy in experimental tasks where subjects are asked to generate or recognize random sequences (Ayton, Hunt, & Wright, 1989, 1991Lopes, 1982;Lopes & Oden, 1987;Neuringer, 1989;Triesman & Faulkner, 1990). For example, Pinker (1997) is critical of the presumption of faulty reasoning typically accompanying observations of the gambler's fallacy:…”

Asset prices and informed traders’ abilities: Evidence from experimental asset markets

“…Moreover, traders have difficulty dealing with variability in general, which may have a deleterious effect on their abilities to properly use forecasts (Lopes & Oden, 1987).…”

Operant variability: Evidence, functions, and theory

“…In the case of random-number generation by human subjects, biases may be due to misconceptions concerning what "random" means. However, some biases can be overcome through feedback and instructions (Lopes & Oden, 1987;Neuringer, 1986).…”