The Gambler’s Fallacy and the Hot Hand: Empirical Data from Casinos

Croson, Rachel; Sundali, James A.

doi:10.1007/s11166-005-1153-2

Cited by 314 publications

(233 citation statements)

References 26 publications

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“…Individuals adhering to the gambler's fallacy (GF) appear to assume non-independence between sequential outcomes, consistent with the belief that the probability of obtaining a reward decreases after recent reinforcement; consequently, they increase their probability of choosing an action that was not recently rewarded (Estes, 1964;Tversky and Kahneman, 1971). Individuals in a real casino have demonstrated the fallacy (Croson and Sundali, 2005), and when non-humans (e.g., a computer or slot machine) generate sequences of events, the sequences are considered more likely to show the negative recency expected by GF (Ayton and Fischer, 2004). More recent work has examined factors modulating GF and the extent to which it represents rationality (Hahn and Warren, 2009;Barron and Leider, 2010).…”

Section: Introductionmentioning

confidence: 83%

Human Dorsal Striatal Activity during Choice Discriminates Reinforcement Learning Behavior from the Gambler's Fallacy

Jessup¹,

O’Doherty²

2011

J. Neurosci.

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Reinforcement learning theory has generated substantial interest in neurobiology, particularly because of the resemblance between phasic dopamine and reward prediction errors. Actor-critic theories have been adapted to account for the functions of the striatum, with parts of the dorsal striatum equated to the actor. Here, we specifically test whether the human dorsal striatum-as predicted by an actor-critic instantiation-is used on a trial-to-trial basis at the time of choice to choose in accordance with reinforcement learning theory, as opposed to a competing strategy: the gambler's fallacy. Using a partial-brain functional magnetic resonance imaging scanning protocol focused on the striatum and other ventral brain areas, we found that the dorsal striatum is more active when choosing consistent with reinforcement learning compared with the competing strategy. Moreover, an overlapping area of dorsal striatum along with the ventral striatum was found to be correlated with reward prediction errors at the time of outcome, as predicted by the actor-critic framework. These findings suggest that the same region of dorsal striatum involved in learning stimulus-response associations may contribute to the control of behavior during choice, thereby using those learned associations. Intriguingly, neither reinforcement learning nor the gambler's fallacy conformed to the optimal choice strategy on the specific decision-making task we used. Thus, the dorsal striatum may contribute to the control of behavior according to reinforcement learning even when the prescriptions of such an algorithm are suboptimal in terms of maximizing future rewards.

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Section: Introductionmentioning

confidence: 83%

Human Dorsal Striatal Activity during Choice Discriminates Reinforcement Learning Behavior from the Gambler's Fallacy

Jessup¹,

O’Doherty²

2011

J. Neurosci.

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“…This can be illustrated by the gambler's fallacy: After one has observed a streak of five times black at the roulette table, it is very hard to avoid the feeling that ''it is time for red'' now, which may be a sufficient motivation to bet on it (Croson and Sundali 2005). However, there exist important individual differences with regard to how strongly people are prone to that misperception, and with regard to how much they give into that misperception and bet on it (Scheibehenne and Studer 2014;Scheibehenne et al 2011).…”

Section: Perceiving Illusory Patterns and Betting On Themmentioning

confidence: 99%

Betting on Illusory Patterns: Probability Matching in Habitual Gamblers

et al. 2015

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Why do people gamble? A large body of research suggests that cognitive distortions play an important role in pathological gambling. Many of these distortions are specific cases of a more general misperception of randomness, specifically of an illusory perception of patterns in random sequences. In this article, we provide further evidence for the assumption that gamblers are particularly prone to perceiving illusory patterns. In particular, we compared habitual gamblers to a matched sample of community members with regard to how much they exhibit the choice anomaly 'probability matching'. Probability matching describes the tendency to match response proportions to outcome probabilities when predicting binary outcomes. It leads to a lower expected accuracy than the maximizing strategy of predicting the most likely event on each trial. Previous research has shown that an illusory perception of patterns in random sequences fuels probability matching. So does impulsivity, which is also reported to be higher in gamblers. We therefore hypothesized that gamblers will exhibit more probability matching than nongamblers, which was confirmed in a controlled laboratory experiment. Additionally, gamblers scored much lower than community members on the cognitive reflection task, which indicates higher impulsivity. This difference could account for the difference in probability matching between the samples. These results suggest that gamblers are more willing to bet impulsively on perceived illusory patterns.

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“…Terrell (1994) investigates field data from horse races and finds that betting behavior is consistent with the gambler's fallacy. Croson and Sundali (2005) investigate the betting behavior of roulette players in a casino in Reno, Nevada. They find that a long streak of the same outcome leads players to bet disproportionately on the opposite outcome.…”

Section: Introductionmentioning

confidence: 99%

Biased probability judgment: Evidence of incidence and relationship to economic outcomes from a representative sample

Dohmen¹,

Falk²,

Huffman³

et al. 2009

Journal of Economic Behavior & Organization

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. Many economic decisions involve a substantial amount of uncertainty, and therefore crucially depend on how individuals process probabilistic information. In this paper, we investigate the capability for probability judgment in a representative sample of the German population. Our results show that almost a third of the respondents exhibits systematically biased perceptions of probability. The findings also indicate that the observed biases are related to individual economic outcomes, which suggests potential policy relevance of our findings. JEL Classification:C90, D00, D10, D80, D81, H00

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The Gambler’s Fallacy and the Hot Hand: Empirical Data from Casinos

Cited by 314 publications

References 26 publications

Human Dorsal Striatal Activity during Choice Discriminates Reinforcement Learning Behavior from the Gambler's Fallacy

Human Dorsal Striatal Activity during Choice Discriminates Reinforcement Learning Behavior from the Gambler's Fallacy

Betting on Illusory Patterns: Probability Matching in Habitual Gamblers

Biased probability judgment: Evidence of incidence and relationship to economic outcomes from a representative sample

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