The gambler’s fallacy prevails in lottery play

We use natural experiments in Haiti and Denmark to test recent theoretical predictions about how agents react to random events. Using player-level administrative data, we find that the average lottery player avoids numbers that recently won (the gambler’s fallacy). A small subset of players in each...

Full description

Saved in:
Bibliographic Details
Published in:Journal of risk and uncertainty 2024-08, Vol.69 (1), p.33-56
Main Authors: Dillon, Brian, Lybbert, Travis J.
Format: Article
Language:English
Subjects:
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Environmental Economics
Gambling
Lotteries
Microeconomics
Operations Research/Decision Theory
Polls & surveys
Winners
Citations: Items that this one cites
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We use natural experiments in Haiti and Denmark to test recent theoretical predictions about how agents react to random events. Using player-level administrative data, we find that the average lottery player avoids numbers that recently won (the gambler’s fallacy). A small subset of players in each country exhibit the hot hand fallacy, and bet recent winners. We find no evidence of ‘streak switching,’ in which beliefs switch from the gambler’s fallacy to the hot hand fallacy as winning streaks grow. Follow-up survey data in Haiti indicate that almost all lottery players believe that some numbers are more likely to win than others, and that recent winning history is an important factor in subjective beliefs about numbers’ win probabilities.
ISSN:0895-5646
1573-0476
DOI:10.1007/s11166-024-09434-6