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Abstract

The “gambler's fallacy” is the false belief that a random event is less likely to occur if the event has occurred recently. Such beliefs are false if the onset of events is in fact independent of previous events. We study gender differences in the gambler's fallacy using data from the Danish state lottery. Our data set is unique in that we track individual players over time which allows us to investigate how men and women react with their number picking to outcomes of recent lotto drawings. We find evidence of gambler's fallacy for men but not for women. On average, men are about 1% less likely to bet on numbers drawn in the previous week than on numbers not drawn. Women do not react significantly to the previous week's drawing outcome.

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... These analyses, which lack the ability to examine players' betting behaviours at a microscopic level, may sometimes be less direct, thus having limited acceptance and effectiveness. Among the recent studies that have used lottery numbers picked by online players (Lien & Yuan, 2015a, 2015bLien, Yuan, & Zheng, 2018;Suetens, Galbo-Jørgensen, & Tyran, 2015;Suetens & Tyran, 2012;Wang, Potter van Loon, van den Assem, & van Dolder, 2016;Yuan, Sun, & Siu, 2014), some have been able to analyse the reactions of both players and ticket vendors (Lien & Yuan, 2015a, 2015bLien et al., 2018;Yuan et al., 2014) by taking advantage of special features within the data. ...
... From an overview of psychological literature, Griffiths and Wood (2001) suggested that heuristics and biases can provide some insights into why lottery games are so successful and help in understanding the biased beliefs of gamblers. One common cognitive bias is the gambler's fallacy, which corresponds to Tversky and Kahneman's 'representativeness heuristic' (1974) and which has also been identified in animal racing, casino gambling, three-digit lottery and online lottery games Coleman, 2004;Croson & Sundali, 2005;Lien & Yuan, 2015a, 2015bLien et al., 2018;Suetens et al., 2015;Suetens & Tyran, 2012;Terrell, 1994Terrell, , 1998Wang et al., 2016). ...
... In system betting, players place bets on all combinations covering a set of numbers that they selected in advance. This special advantage makes it easy to explore whether sophisticated players who use the system-betting strategy have stronger cognitive bias than those who do ordinary betting (Suetens et al., 2015;Suetens & Tyran, 2012), which is an issue that has not been addressed before. Our results show that players who use system betting display higher degrees of the gambler's fallacy and the hot-number bias than players who use ordinary betting. ...
Article
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By examining a unique dataset, the authors build a time series model that can describe the dynamics of lotto players’ betting behaviour. The results are derived from a database maintained by a lottery operator in Taiwan, which consists of number combinations selected by players for 203 consecutive draws in 2 years, including those placed through certain systematic schemes. The dynamic models that the authors established show that the players’ number selection over time is influenced by three factors: the numbers that they chose in the last draw, the winning numbers of the previous draw and the numbers with the highest observed winning frequencies in the past. The first factor reflects the mean-reverting nature of the lotto players’ selection behaviour. The second reaffirms the well-known gambler’s fallacy in which players believe that they can improve their chances of winning by avoiding numbers that recently won. The third exhibits the players’ bias towards certain numbers with an above-average probability to be drawn. The two latter types of misconceptions are found to be more predominant in systematic betters, which suggests that the extent of the lotto players’ behavioural biases may vary according to how they place their bets.
... Many earlier studies rely on indirect or aggregated data, analyzing the number of winners given particular draw results (Chernoff, 1981;Terrell, 1994;Finkelstein, 1995;Scoggins, 1995;Haigh, 1997;Cox, Daniell & Nicole, 1998;Papachristou & Karamanis, 1998;Farrell, Hartley, Lanot & Walker, 2000;Roger & Broihanne, 2007) or the overall popularity of individual numbers or combinations (Joe, 1987;Halpern & Devereaux, 1989;Stern & Cover, 1989;Henze, 1997;Simon, 1999;Ding, 2011;Lien, Yuan & Zheng, 2015;. To the best of our knowledge, only Suetens and Tyran (2012) and Suetens, Galbo-Jørgensen & Tyran (2015) use detailed individual-level data on lottery players and number choices. All these studies focus on a subset of the behavioral regularities that we consider in the present paper. ...
... Various lottery studies find that players tend to avoid numbers that were recently drawn Terrell, 1994;Ding, 2011;Suetens & Tyran, 2012). 9 Suetens et al. (2015) document a similar response to the previous draw, but they also find that a number is popular if it appears in multiple recent draws. ...
Article
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We explore people’s preferences for numbers in large proprietary data sets from two different lottery games. We find that choice is far from uniform, and exhibits some familiar and some new tendencies and biases. Players favor personally meaningful and situationally available numbers, and are attracted towards numbers in the center of the choice form. Frequent players avoid winning numbers from recent draws, whereas infrequent players chase these. Combinations of numbers are formed with an eye for aesthetics, and players tend to spread their numbers relatively evenly across the possible range.
... In this regard, outcome frequency may be another factor that determines fallacy biases. While outcome characteristics affect fallacy biases, personal characteristics such as gender were also suggested as a factor that bifurcates the fallacy types, but relevant findings were very limited and remain inconclusive (Dohmen et al. 2009;Suetens and Tyran 2011). Thus, it is important to revisit the effect of gender on fallacy bias. ...
... Dohmen et al. (2009) found that women were more likely than men to misperceive randomness in coin-tossing tasks. However, a more recent study, which was conducted by Suetens and Tyran (2011), reported that men tend to comply with a gambler's fallacy by not betting on lottery numbers drawn in the previous week, whereas women did not exhibit any dispositional behavior. ...
Article
Gambling is a leisure activity, which is enjoyed by many people around the world. Among these people, Chinese are known for their high propensity to gamble and are highly sought after by many casinos. In this exploratory study, the effect of two types of fallacy bias-positive recency and negative recency-on the betting behavior of Chinese gamblers is investigated. Although the influence of fallacy bias on a betting decision is well documented, little is known about the interaction of the factors that dictate fallacy bias. Drawing from an analysis of 2,645 betting decisions, the results show that Chinese gamblers primarily endorse positive recency, especially when the latest outcome is more frequent. This is contrary to most findings on Western subjects in which negative recency is more common. Current findings have meaningful implications to casino gaming entertainment businesses and public policymakers.
... Luckily, research shows that not all people are evenly susceptible to fall for such fallacies. Gender, cognitive ability, previous experiences regarding randomness, formal education, context, and also age predicted individual differences in fallacies related to randomness and probability (e.g., Barron & Leider, 2010;Davidson, 1995;Farmer et al., 2017;Matthews, 2013;Morsanyi et al., 2009;Chiesi et al., 2011;Suetens & Tyran, 2012). For example, intellectual abilities are believed to protect people against judgment biases (Kokis et al., 2002) when the context or problem is not too complex (e.g., Kahneman & Frederick, 2002;Stanovich, 1999). ...
Article
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The many studies with coin-tossing tasks in literature show that the concept of randomness is challenging for adults as well as children. Systematic errors observed in coin-tossing tasks are often related to the representativeness heuristic, which refers to a mental shortcut that is used to judge randomness by evaluating how well a set of random events represents the typical example for random events we hold in our mind. Representative thinking is explained by our tendency to seek for patterns in our surroundings. In the present study, predictions of coin-tosses of 302 third-graders were explored. Findings suggest that in third grade of elementary school, children make correct as well as different types of erroneous predictions and individual differences exist. Moreover, erroneous predictions that were in line with representative thinking were positively associated with an early spontaneous focus on regularities, which was assessed when they were in second year of preschool. We concluded that previous studies might have underestimated children’s reasoning about randomness in coin-tossing contexts and that representative thinking is indeed associated with pattern-based thinking tendencies.
... Nobody won the jackpot, but an unusually high number of winners (239) won second prize (5 correct numbers plus the bonus number) because many players bet on sequences, in this case 40-41-42-43-44-45. 4 See also Clotfelter and Cook (1993), Dek (1994), and Suetens and Tyran (2012) for other illustrations of these two fallacies in lottery gambling. shared among all those winners. ...
Article
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Conscious selection is the mental process by which lottery players select numbers nonrandomly. In this paper, we show that the number 19, which has been heard, read, seen, and googled countless times since March 2020, has become significantly less popular among Belgian lottery players after the World Health Organization named the disease caused by the coronavirus SARS-CoV-2 “COVID-19”. We argue that the reduced popularity of the number 19 is due to its negative association with the COVID-19 pandemic. Our study triangulates evidence from field data from the Belgian National Lottery and survey data from a nationally representative sample of 500 Belgian individuals. The field data indicate that the number 19 has been played significantly less frequently since March 2020. However, a potential limitation of the field data is that an unknown proportion of players selects numbers randomly through the “Quick Pick” computer system. The survey data do not suffer from this limitation and reinforce our previous findings by showing that priming an increase in the salience of COVID-19 prior to the players’ selection of lottery numbers reduces their preference for the number 19. The effect of priming is concentrated amongst those with high superstitious beliefs, further supporting our explanation for the reduced popularity of the number 19 during the COVID-19 pandemic.
... This way of thinking is fallacious because previous occurrences have no bearing on the likelihood of specific future events (Kenton, 2021). According to Suetens and Tyran (2012), the gambler's fallacy is the fallacious perception that a random event is less likely to occur if the event has occurred recently. Such beliefs are untrue if the onset of events occurs independently of prior events. ...
Article
Purpose This article aims to systematically review the literature published in recognized journals focused on cognitive heuristic-driven biases and their effect on investment management activities and market efficiency. It also includes some of the research work on the origins and foundations of behavioral finance, and how this has grown substantially to become an established and particular subject of study in its own right. The study also aims to provide future direction to the researchers working in this field. Design/methodology/approach For doing research synthesis, a systematic literature review (SLR) approach was applied considering research studies published within the time period, i.e. 1970–2021. This study attempted to accomplish a critical review of 176 studies out of 256 studies identified, which were published in reputable journals to synthesize the existing literature in the behavioral finance domain-related explicitly to cognitive heuristic-driven biases and their effect on investment management activities and market efficiency as well as on the origins and foundations of behavioral finance. Findings This review reveals that investors often use cognitive heuristics to reduce the risk of losses in uncertain situations, but that leads to errors in judgment; as a result, investors make irrational decisions, which may cause the market to overreact or underreact – in both situations, the market becomes inefficient. Overall, the literature demonstrates that there is currently no consensus on the usefulness of cognitive heuristics in the context of investment management activities and market efficiency. Therefore, a lack of consensus about this topic suggests that further studies may bring relevant contributions to the literature. Based on the gaps analysis, three major categories of gaps, namely theoretical and methodological gaps, and contextual gaps, are found, where research is needed. Practical implications The skillful understanding and knowledge of the cognitive heuristic-driven biases will help the investors, financial institutions and policymakers to overcome the adverse effect of these behavioral biases in the stock market. This article provides a detailed explanation of cognitive heuristic-driven biases and their influence on investment management activities and market efficiency, which could be very useful for finance practitioners, such as an investor who plays at the stock exchange, a portfolio manager, a financial strategist/advisor in an investment firm, a financial planner, an investment banker, a trader/broker at the stock exchange or a financial analyst. But most importantly, the term also includes all those persons who manage corporate entities and are responsible for making their financial management strategies. Originality/value Currently, no recent study exists, which reviews and evaluates the empirical research on cognitive heuristic-driven biases displayed by investors. The current study is original in discussing the role of cognitive heuristic-driven biases in investment management activities and market efficiency as well as the history and foundations of behavioral finance by means of research synthesis. This paper is useful to researchers, academicians, policymakers and those working in the area of behavioral finance in understanding the role that cognitive heuristic plays in investment management activities and market efficiency.
... Illusory pattern detection has been the cognitive bias under study in a large proportion (27%) of past studies that have investigated the relationship between cognitive bias and risk (Craig, 2016). This cognitive bias has been studied by looking at lottery play in relation to previous lottery draws (e.g., Clotfelter, & Cook, 1993;Suetens & Tyran, 2012;Terrell, 1994), and in investment decisions (e.g., Johnson et al., 2005). It has also been studied by observing participants' predictions during games of chance, such as flipping a coin and roulette (e.g., Ayton & Fischer, 2004;Ball, 2012;Huber et al., 2010). ...
Thesis
Full-text available
Development and psychometric evaluation of a holistic measure of risk perception
... Although the removal was justified, even required, by established methodological practice, it runs counter to established theory and requires further attention. The example of the gambler's fallacy is particularly interesting as previous work has found evidence that it, and other cognitive biases based on misunderstanding probability, are more common in males than females (Suetens and Tyran, 2012;Donati, Chiesi and Primi, 2013). However, given that the effects of the gambler's fallacy have also been found to decrease with age (Fischbein and Schnarch, 1997) it seems likely that this result is directly associated with the preference for video gaming, rather than the age or gender of respondents in dataset 2. This position is supported by the fact that the subsequent CFA was conducted using a sample in which 58% (approx.) ...
Article
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"Gamblification" is a rapidly emerging form of media convergence between the more chance-based activity of gambling and the more skill-based activity of (video) gaming, for example in the competitive video gaming known as esports. The marriage of video gaming and gambling has been theorized as bringing about new forms of gambling-related cognitive processes in individuals and affecting the ways in which they approach and evaluate gambling situations. As such, a pertinent research problem is whether existing measurement instruments designed to identify gambling related cognitions can be employed in this new context and population, and if not, how they can be adapted. Therefore, in this study, we investigate the psychometric properties of Gambling Related Cognitions Scale (GRCS) and a series of items developed following a review of existing literature. We employ 3 separate data sets gathered from video game players who also gamble (N = 442; 391; and 335). The results indicate that the GRCS is not a robust measure to use for video game players who gamble; the new GamCog measure was, therefore, developed to address this gap. The study implies that the most significant cognitive differences between video game players and the wider population are the ways in which concepts of skill and luck are perceived, potentially due to the sense of personal agency engendered by video games. (PsycINFO Database Record (c) 2019 APA, all rights reserved).
... However, they found no differences in terms of behavior, choice of game, or strategy. The distinction between VR and RR schedules has also been proposed as important for the gambler's fallacy, or the false belief that a random event is less likely to occur if the event has occurred recently (Suetens & Tyran, 2012). Following repeated exposure to gambling machines, gamblers could rationally expect to win after a series of losses and develop a strategy of continuous raising stakes to achieve a reward. ...
Article
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Gambling is a field that harbors both harmless recreational activities and pathological varieties that may be considered an addictive disorder. It is also a field that deserves special interest from a learning theoretical perspective, since pathological gambling represents both a pure behavioral addiction involving no ingestion of substances and behavior that exhibits extreme resistance to extinction. As the field of applied psychology of learning, or behavior analysis, espouses a bottom-up approach, the basis of understanding begins in basic research on behavioral principles. This article provides a narrative review of the field of laboratory experiments conducted to disentangle the learning processes of gambling behavior. The purpose of this review is to give an overview of learning principles in gambling that has been demonstrated under lab conditions and that may be of importance in the development of clinical applications when gambling has become a problem. Several processes, like the importance of delay and probability discounting, reinforcement without actual winning, and rule governed behavior have been experimentally verified. The common denominator appears to be that they impede extinction. Other areas, especially Pavlovian conditioning, are scarce in the literature. Our recommendations for the future would be to study Pavlovian and instrumental conditioning in interaction. Treatment programs should profit from strategies that serve to enhance extinction learning. We also conclude that online gambling should provide a promising environment for controlled research on how to limit excessive gambling, provided that the gambling companies are interested in that.
... Researchers found no significant difference between male and female investors in their capacity to exhibit self-attribution bias. Suetens and Tyran (2012) studied the role of gender in showing gambler's fallacy by using the data from the Danish state lottery. Researchers documented the evidence of gambler's fallacy only for men, but not for women. ...
Article
Classical finance theories are based on the assumption of rational decision making. However, it has been concluded by various researchers that in practical situations, humans are not fully rational. They are influenced by various behavioural factors and errors in judgment while making decisions. These behavioural factors, also termed as cognitive illusions, cannot be adequately explained by traditional finance theories. This research work sought to assess the impact of gender on certain identified behavioural factors (or biases) such as overconfidence bias, reference point bias, self-attribution bias, framing effect bias, overreaction bias, and regret avoidance bias in investment decision making of individual investors. A sample survey of 521 individual investors was conducted through a structured questionnaire in the National Capital Region of India. The results of detailed investigation of collected data revealed clearly that individuals' investment decisions are not fully rational. Investors were found to be prone towards behavioural biases tested in this study. However, mix evidence was found in the study about variation in the propensity to exhibit these behavioural biases between male and female investors. Gender effect was found to be statistically significant in case of overconfidence bias, self-attribution bias, and regret avoidance bias.
... No segundo estudo, novamente, foi constatado que a amostra feminina não apresentou o viés da falácia do jogador, efeito observado apenas entre os homens. Este achados corroboram estudos anteriores na área de economia (ver Croson & Gneezy, 2009;Suetens & Tyran, 2012) que relatam que as mulheres -em relação aos homens -apresentam diferenças nas preferências que envolvem risco e são menos suscetíveis à falácia do jogador. ...
... Second, the factor of gender was conceived to affect the hot-hand believes. Some researches provided the evidences that the males scored higher on sensation seeking than the females (Xu & Harvey, 2014), and the males tended to rely on fallacious believes compared to the females in lottery (e.g., likely to avoid betting on same numbers that were reported in the previous time) (Suetens & Tyran, 2012). ...
Article
Although human motivation has been well studied, studies manipulating human motivation are scarce. The present study aimed to induce the hot-hand phenomenon using a pseudo success situation. Under the framework of the two-factor theory of emotion, we investigated the effect of a deviant situation, such as continuously winning or losing, on mental attitudes and the evaluation of the results using the contingent-negative variation (CNV) and feedback-locked P3 (FB-P3). The CNV is a neural activity that reflects emotional expectations and motoric preparation. The FB-P3 is a neural activity that is induced by external feedback. Fifteen participants performed an S1-S2 reaction time task with an opponent in the following three competitive conditions: actual feedback (feedback is contingent on performance), winning streak (WS; tendency to win regardless of performance), and losing streak (LS; tendency to lose regardless of performance). Each condition was characterized by the winning rate (49.26%, 80%, and 20%). Moreover, a principal component analysis was performed on the CNV data to determine the distinct temporal neural activity. The principal component analysis identified three components (auditory P2, early CNV, and late CNV) in the original CNV. The auditory P2 and the occurrence of pleasant emotions were higher in the WS condition than in the LS condition. However, the early CNV, late CNV, and FB-P3 were higher in the LS condition than in the WS condition. These findings confirmed that the losing streak situation induced an unpleasant emotion. However, the losing streak situation appeared to improve the mental attitude to prepare for faster responses and enhance the interest in the results.
... The effect of sequence-ending streak length is individually measured for German and Japanese participants. The regression also controls for a gender effect which was found in earlier studies of the law of small numbers (Suetens & Tyran, 2012). Our hypothesis states that Germans are more susceptible to the hot hand fallacy than Japanese. ...
Article
Momentum is a consistent phenomenon in financial data from the majority of markets around the globe. One prominent exception is the Japanese market, where returns from a momentum-investment strategy are nonexistent. The authors investigated international differences in the representativeness heuristic, which is one potential driver of momentum. After observing sequences of a random walk, subjects give probability estimates for the direction of the respective next change. The experiment was conducted in Japan and in Germany. For a subgroup of participants with lower cognitive abilities our results are perfectly in line with international momentum evidence.
... No segundo estudo, novamente, foi constatado que a amostra feminina não apresentou o viés da falácia do jogador, efeito observado apenas entre os homens. Este achados corroboram estudos anteriores na área de economia (ver Croson & Gneezy, 2009;Suetens & Tyran, 2012) que relatam que as mulheres -em relação aos homens -apresentam diferenças nas preferências que envolvem risco e são menos suscetíveis à falácia do jogador. ...
Article
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Entre as diferentes teorias heurísticas que visam explicar o processo decisório, este estudo explora a falácia do jogador e a teoria da mão-quente. O objetivo deste artigo é investigar a influência da autorregulação afetiva nas heurísticas e vieses utilizados no processo de tomada de decisão. Foram realizados dois experimentos. No primeiro, foi avaliado se os resultados anteriores de ganhos com ações de empresas afetavam a preferência dos consumidores pela compra ou venda dessas ações. Constatou-se diferença entre gêneros no processo decisório, com a ocorrência da falácia do jogador para a amostra masculina, mas não para a amostra feminina. O segundo experimento foi realizado com o intuito de verificar o papel da autorregulação nestas heurísticas. Após a indução de autorregulação, observou-se a ocorrência da falácia do jogador e o viés da mão quente em algumas condições, indicando alterações nas decisões tomadas pelos consumidores. A partir desses resultados, conclui-se que há uma influência significativa do estado afetivo nas tomadas de decisão e que as mulheres são menos suscetíveis à falácia do jogador do que os homens. Keywords Autorregulação; tomada de decisão; falácia do jogador; teoria da mão quente. THE INFLUENCE OF SELF-REGULATION IN HEURISTICS AND BIASES USED IN CONSUMER DECISION MAKING RESUMO Among the different heuristics theories that attempt to explain the decision making process, this study explores the gambler's fallacy and the hot hand theory. This paper investigates the influence of self-regulation in heuristics and biases used during consumer decision making. Two experiments were conducted. The first one assessed if results of past performance of stocks affected consumer preference to buy or sell those stocks. Results indicated a significant difference between gender in decision making, with the occurrence of the gambler's fallacy for the male sample, but not for the female sample. The second experiment investigated the role of self-regulation in the gambler's fallacy and hot hand bias. Results showed that after the induction of self-regulation, it was noticed the gambler's fallacy and the hot hand theory in some conditions, indicating changes in the decisions made by consumers. We conclude that there is a significant influence of affective state in decision making and that women are less susceptible to the gambler's fallacy than men. Palavras-Chave Self-regulation; decision making; gambler’s fallacy; hot hand theory.
... Researchers found no significant difference between male and female investors in their capacity to exhibit self-attribution bias. Suetens and Tyran (2012) studied the role of gender in showing gambler's fallacy by using the data from the Danish state lottery. Researchers documented the evidence of gambler's fallacy only for men, but not for women. ...
Article
Classical finance theories are based on the assumption of rational decision making. However, it has been concluded by various researchers that in practical situations, humans are not fully rational. They are influenced by various behavioural factors and errors in judgment while making decisions. These behavioural factors, also termed as cognitive illusions, cannot be adequately explained by traditional finance theories. This research work sought to assess the impact of gender on certain identified behavioural factors (or biases) such as overconfidence bias, reference point bias, self-attribution bias, framing effect bias, overreaction bias, and regret avoidance bias in investment decision making of individual investors. A sample survey of 521 individual investors was conducted through a structured questionnaire in the National Capital Region of India. The results of detailed investigation of collected data revealed clearly that individuals' investment decisions are not fully rational. Investors were found to be prone towards behavioural biases tested in this study. However, mix evidence was found in the study about variation in the propensity to exhibit these behavioural biases between male and female investors. Gender effect was found to be statistically significant in case of overconfidence bias, self-attribution bias, and regret avoidance bias.
... Evidence from laboratory experiments (Grether, 1992) suggests that individuals rely upon the representativeness heuristic when making repeated decisions under uncertainty. There is also field evidence to support this conjecture: Jorgenson, Suetens & Tyran (2011) and Suetens & Tyran (2012) look at betting data from the Danish lottery and find that Danish bettors are prone to the "hot hand fallacy"-picking lotto numbers which have been drawn in consecutive weeks, a phenomenon consistent with representativeness. See Oskarsson et al. (2009) for a comprehensive survey on this literature, as well as a theoretical framework for mental models of decision-makers' beliefs on binary events. ...
Article
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Environmental uncertainty is at the core of much of human activity, ranging from daily decisions by individuals to long-term policy planning by governments. Yet, there is little quantitative evidence on the ability of non-expert individuals or populations to forecast climate-related events. Here we report on data from a 90-year old prediction game on a climate related event in Alaska: the Nenana Ice Classic (NIC). Participants in this contest guess to the nearest minute when the ice covering the Tanana River will break, signaling the start of spring. Previous research indicates a strong correlation between the ice breakup dates and regional weather conditions. We study betting decisions between 1955 and 2009. We find the betting distribution closely predicts the outcome of the contest. We also find a significant correlation between regional temperatures as well as past ice breakups and betting behavior, suggesting that participants incorporate both climate and historical information into their decision-making.
... The second part of RQ 2 again focuses on whether gender affects behavioral biases. Dohmen et al. (2009) and Suetens and Tyran (2012) provide some (inconclusive) evidence on this issue. ...
Article
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In laboratory experiments we explore the effects of communication and group decision making on investment behavior and on subjects’ proneness to behavioral biases. Most importantly, we show that communication and group decision making do not impact subjects’ overall proneness to the hot hand fallacy and to the gambler's fallacy. However, groups decide differently than individuals, as they rely significantly less on useless outside advice from “experts” and choose the risk-free option less frequently. Furthermore we document gender differences in investment behavior: groups of two female subjects choose the risk-free investment more often and are marginally more prone to the hot hand fallacy than groups of two male subjects.
... Several findings support this deduction. For example, when selecting national lottery numbers to play, males more frequently invoked the "gambler's fallacy"-the intuition that an event is less likely to reoccur if it occurred recently (Suetens & Tyran, 2012). Hence, unlike females, they were less likely to select lotto ticket numbers that were winners in the previous week. ...
Article
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Efforts to identify and understand gender differences have a long history that has sparked lively debate and generated much public interest. Although understanding gender differences is pivotal to consumer researchers and marketers, investigations into this issue by such individuals have been few in number, often weak in theory, and rather limited in progress made. This paper strives to reinvigorate such inquiry. We begin by describing four major theories of gender differences (socio-cultural, evolutionary, hormone-brain, and the selectivity hypothesis) and then assess relevant research from 2000-2013 in marketing, psychology, and biomedicine. From this, five conclusions emerge: Males are more self-oriented, while females are more other-oriented; females are more cautious responders; females are more responsive to negative data; males process data more selectively and females more comprehensively; and females are more sensitive to differentiating conditions and factors. We conclude by identifying several areas of opportunity for advancing our understanding of gender differences.
Article
Purpose This paper aims to analyze the heuristics and cognitive biases described by behavioral finance in the investment decision-making process of Portugal’s housing market. Design/methodology/approach In a first step, the authors applied an exploratory factor analysis (EFA) to assess the impact of heuristics and cognitive biases on investors’ decision-making. In a second step, the authors run a structural equation model (SEM) diagram path to assess if the sociodemographic characteristics of housing market investors determine the identified heuristics and if the heuristics condition the investors’ investment criteria. Findings Herd behavior and the heuristics of representativeness, availability and anchoring influence the housing market’s investors’ behavior in their decision-making process. Investors with above-average income show higher levels of overconfidence. Investors showing higher levels of overconfidence also tend to be more sensitive to the house price under analysis for investment. Women tend to show higher levels of the availability and anchoring heuristic. In turn, housing market investors showing higher levels of availability and anchoring heuristic tend to be more sensitive to the price and location of the house under analysis for investment. Research limitations/implications The explained variance of the EFA is below 50%, and the root mean square of approximation of the SEM is above the threshold of 0.05. These indicators are evidence of the models’ fragility. Practical implications Governments and regulators can better prevent real estate bubbles if they monitor behavioral biases and heuristics of housing investors together with quantitative indicators. Realtors can profit from adapting their marketing strategy and commercial communication to investors of sociodemographic groups more prone to a specific type of heuristics. Originality/value To the best of the authors’ knowledge, this is the first study that combines the contributions of behavioral finance with Portugal’s housing investment market and the first study connecting heuristics to investment criteria.
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Financial management decisions are made by people, and people, in all instances, are shaped by their behavioral traits. Here we provide extensive insight on the theoretical and empirical analysis made on cognitive biases and their influence on financial decisions. To provide a systematic exposition, we set three broad categories: heuristics and biases, choices (including framing and preferences) and social factors. We then describe the main biases within each category and provide an extensive revision of the main theoretical and empirical developments about their impact on financial decisions.
Book
Behavioral Economics: Evidence, Theory, and Welfare provides an engaging and accessible introduction to the motivating questions, real-world evidence, theoretical models, and welfare implications of behavioral economics concepts. Applications and examples illustrate the broad relevance of behavioral economics for consumers, firms, markets, and policy makers alike. The book highlights the process by which economists evaluate evidence and disentangle theories with different social welfare implications. Accessible to students from diverse economic backgrounds, this textbook is an ideal resource for courses on behavioral economics, experimental economics and related areas.
Chapter
In traditional finance theories and in the efficient market hypothesis, human beings are regarded as rational entities. It has been accepted that people exhibit rational behavior in investment decisions. However, various anomalies have been observed as a result of the inability of these theories to explain the change in the markets. These anomalies have led to criticism of traditional finance theories and have been regarded as the beginning of behavioral finance. Behavioral finance theories and models argue that the definition of stock prices is influenced by psychological, cognitive and emotional factors of investors. The presence of investors, who do not act rationally on the stock market, and the fact that psychological and emotional factors are effective in the decision-making process distract the stock market from being effective. Determining the investor behaviors that cause the anomalies detected in the stock market and putting out the possible reasons is important in terms of estimating the share price. In this study, information was given on traditional finance theories that accept individuals as rational. Behavioral finance models and theories were examined to investigate irrational behavior. In addition, anomalies resulting from irrational behavior of investors and investor behavior were examined, and also the relationship between investor behaviors and anomalies was examined. © Springer International Publishing AG, part of Springer Nature 2018.
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This paper overviews the theoretical and empirical research on behavioral biases and their influence in the literature. To provide a systematic exposition, we present a unified framework that takes the reader through an original taxonomy, based on the reviews of relevant authors in the field. In particular, we establish three broad categories that may be distinguished: heuristics and biases; choices, values and frames; and social factors. We then describe the main biases within each category, and revise the main theoretical and empirical developments, linking each bias with other biases and anomalies that are related to them, according to the literature.
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Traditionally, the literature has considered the gambling as a male prerogative. The current reality shows a participatory increase of gambling in women. In addition, democratic, traditional and low threshold games that, by their nature, seem mostly targeted on non-traditional gamers such as women, has been less investigated. This study aims to explore characteristics, motivations, gaming behaviours and satisfaction levels in the main areas of life in the female gender, specifically referred to games that the limited literature has shown as more participated by women, namely lotteries (instant lotteries, numerical games with national totalizer, lotto, traditional lotteries) and slot machines. Two questionnaires constructed ad hoc have been administered to 87 women after that they have gambled on lotteries or slot machines in bar/tobacco shops. The results, according with the literature, highlight two profiles of gamblers: women who play hard games (slot machines, video lotteries, instant lotteries) and players of soft games (lotto, numerical games with national totalizer, traditional lotteries) with different socio-demographic characteristics and consumption profiles and different levels of dissatisfaction in their lives.
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Purpose – The purpose of this paper is to investigate how stock characteristics influence investor trading behavior and psychological pitfalls. Design/methodology/approach – This study employs the methods of Solt and Statman (1989) and Kumar (2009) to examine investor trading activities. Findings – Good companies do not usually have good stocks, while lottery-type stocks show better price performance than other stocks. Due to the representativeness and affect heuristics, the stocks of good companies are frequently transacted, while the low-priced stocks are infrequently transacted. Moreover, investors may display the gambler’s fallacy in the trade of stocks of good companies and the overconfidence and self-attribution bias in the trade of lottery-type stocks. Research limitations/implications – Investors trading lottery-type stocks demonstrate greater maturity than those that trade stocks of good companies; however, psychological pitfalls still dominate investor trading behavior. Practical implications – The representativeness heuristic of “stocks of good companies are good stocks” results in the inclusion of stocks of good companies in a portfolio and poorer price performance, whereas the inclusion of lottery-type stocks in a portfolio brings higher returns within a short period of time. Originality/value – Compared to earlier studies that focussed on the price performance of stocks of good companies and investor trading behavior in relation to lottery-type stocks, this study aims to investigate the influence of stock characteristics on price performance, trading activities, and psychological pitfalls.
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Euro-Canadians and Chinese typically hold different theories about change; Euro-Canadians often engage in linear thinking whereas Chinese often engage in non-linear thinking. The present research investigated the effects of culture-specific theories of change in two related gambling fallacies: the gambler's fallacy (GF; the belief that one is due for a win after a run of losses) and the hot-hand fallacy (HHF; the belief that one's winning streak is likely to continue). In Study 1, participants predicted the outcome of a coin toss following a sequence of tosses. Study 2 involved predicting and betting on the outcome of a basketball player's shot following a sequence of shots. In Study 1, Asians (mainly Chinese) were significantly more likely than Euro-Canadians to believe that they would win (correctly predict the coin toss) after a series of losses (a non-linear thinking pattern), suggesting greater susceptibility to the gambler's fallacy. In Study 2, Euro-Canadians were more likely than Chinese to predict outcomes consistent with a basketball player's streaks (a linear thinking pattern), suggesting greater susceptibility to the hot hand fallacy. By illustrating the role of cultural differences in cognition, these findings contribute to our understanding of why certain cultural groups, such as Chinese, are more susceptible to gambling.
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We investigate the “law of small numbers” using a data set on lotto gambling that allows us to measure players' reactions to draws. While most players pick the same set of numbers week after week, we find that those who do change, react on average as predicted by the law of small numbers as formalized in recent behavioral theory. In particular, players tend to bet less on numbers that have been drawn in the preceding week, as suggested by the “gambler's fallacy”, and bet more on a number if it was frequently drawn in the recent past, consistent with the “hot-hand fallacy”.
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Cognitive bias is prevalent among gamblers, especially those with gambling problems. Grounded in the heuristics theories, this study contributes to the literature by examining a cognitive bias triggered by the break streak pattern in the casino setting. We postulate that gamblers tend to bet on the latest outcome when there is a break-streak pattern. Moreover, three determinants of the betting decision under break-streak pattern, including the streak length of the alternative outcome, the frequency of the latest outcome, and gender, were identified and examined in this study. A non-participatory observational study was conducted among the Cussec gamblers in a casino in Macao. An analysis of 1229 bets confirms our postulation, particularly when the streak of the alternative outcome is long, the latest outcome is frequent, and the gamblers are females. The findings provide meaningful implications for casino management and public policymakers regarding the minimization of gambling harm.
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The present study tests a gestalt (closure) explanation for the gambler's fallacy which posits that runs in random events will be expected to reverse only when the run is open or ongoing. This is contrasted with the law of small numbers explanation suggesting that people expect random outcomes to balance out generally. Sixty-one university students placed hypothetical guesses and bets on a series of coin tosses. Either heads or tails were dominant (8 versus 4). In a closed run condition the run ended prior to the critical trial (e.g., HHHT), and in an open run condition the run remained open (e.g., THHH). As hypothesised, participants showed the gambler's fallacy in the open run condition, but not in the closed run condition. This difference is not due to differential memory for the outcomes. Men, and people with more previous experience gambling, were also found to be more prone to the gambler's fallacy. It is argued that the gestalt explanation best explains the results.
Working Paper
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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This paper examines the major factors in the psychology of lottery gambling (including instant scratchcard lotteries and video lottery terminals) and argues that success is due to a number of simple and inter‐related factors. Part of the popularity of lotteries is that they offer a low cost chance of winning a very large jackpot prize, i.e. without the huge jackpot very few people would play. However, there are other important maintenance factors including: (i) successful advertising and television coverage; (ii) a general ignorance of probability theory; (iii) entrapment; (iv) manufacturing credibility; and (v) use of heuristics (e.g. illusion of control, flexible attributions, hindsight bias, availability bias, representativeness bias). The paper also argues that some types of lottery game (i.e. instant scratchcards and video lottery terminals) can stimulate excessive and problematic Play.
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This study examines the cognitive and social psychological factors underlying UK National Lottery play. A total of 384 respondents were asked about their own lottery playing behaviours, their knowledge of lottery odds and their beliefs about the role of skill, chance, luck and optimism in lottery play. Using hypothetical scenarios, respondents were also asked to rate the likelihood of winning the lottery jackpot (matching all six numbers) with number combinations reflecting different levels of apparent randomness, previous matches, near misses and prize size manipulations. Frequency of lottery play was found to be positively correlated with age, income, Instants scratchcard play, gambling on horse/greyhound racing, the football pools, and binge as well as with beliefs about skill, luck and optimism. Frequency of lottery play was negatively correlated with general education and estimate of relative win likelihoods based on the perceived randomness of number combinations. Planned contrasts revealed that compared to individual (non-syndicate) players, syndicate lottery players played more regularly and gambled more on the football pools. Results are discussed in the light of current cognitive theories surrounding the misperception of probability and their relation to lottery play and in the need for future models to recognise the social factors inherent in syndicate-based lottery participation.
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Psychologists have studied people's intuitive notions of randomness by two kinds of tasks: judgment tasks (e.g., “is this series like a coin?” or “which of these series is most like a coin?”), and production tasks (e.g., “produce a series like a coin”). People's notion of randomness is biased in that they see clumps or streaks in truly random series and expect more alternation, or shorter runs, than are there. Similarly, they produce series with higher than expected alternation rates. Production tasks are subject to other biases as well, resulting from various functional limitations. The subjectively ideal random sequence obeys “local representativeness”; namely, in short segments of it, it represents both the relative frequencies (e.g., for a coin, 50%–50%) and the irregularity (avoidance of runs and other patterns). The extent to which this bias is a handicap in the real world is addressed.
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This study investigates the differences between at-risk gamblers and no-risk gamblers to provide a closer inspection of the characteristics and gambling behavior of at-risk gamblers. The data stem from the first Danish large-scale nationwide study, in 2005, followed by a second wave interview in 2006. The first wave sample consists of 4,932 current gamblers with no current gambling problems or pathology, and the second wave re-interviewed 379 of them. The analysis involves both a logistic regression and cross-tabulations. The results show that at-risk gamblers and no-risk gamblers have significantly different socio-demographic profiles and gambling behaviors. At-risk gambling is more prevalent for men, young-to-middle-aged people, and immigrants, and at-risk gamblers are more likely to have low income, low education, and no children living at home. This study shows that playing high-risk games substantially increases the odds for at-risk gambling. This finding is important for all professionals involved in preventive work.
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This paper examined the nature of irrational gambling-related cognitions in a sample of 926 adolescents (mean age = 14.5 years) sampled from Australian schools. Students were differentiated according to gambling status and administered a series of items that assessed their understanding of objective odds, the nature of randomness, the role of skill in gambling, and the perceived profitability of gambling. The results confirmed previous findings that problem gamblers tend to be more irrational in their perceptions, as indicated by stronger beliefs in the role of skilful play in chance activities, and that gambling is a potentially profitable activity. However, counter intuitively, problem gamblers did not appear to have any poorer understanding of objective probabilities. These results are discussed in terms of Sevigny and Ladouceur's (2004) concept of cognitive switching as well as psychological research concerning the role of emotional and motivational factors in the development of an illusion of control. The implications of these findings for gambling education programs are discussed.
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Research on decision making under uncertainty demonstrates that intuitive ideas of randomness depart systematically from the laws of chance. Two such departures involving random sequences of events have been documented in the laboratory, the gambler’s fallacy and the hot hand. This study presents results from the field, using videotapes of patrons gambling in a casino, to examine the existence and extent of these biases in naturalistic settings. We find small but significant biases in our population, consistent with those observed in the lab. Copyright Springer Science + Business Media, Inc. 2005
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People have erroneous intuitions about the laws of chance. In particular, they regard a sample randomly drawn from a population as highly representative, that is, similar to the population in all essential characteristics.
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There is ample evidence that people cannot generate random series when instructed to do so. Rather, they produce sequences with too few symmetries and long runs and too many alternations among events. The authors propose a psychological theory to account for these findings, which assumes that subjects generate nonrandom sequences that locally represent theoretical random series subject to a constraint on their short-term memory. Closed-form expressions are then derived for the major statistics that have been used to test for deviations from randomness. Results from 3 experiments with 2 and 3 equiprobable alternatives support the model on both the individual and group levels. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
Working Paper
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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This study shows that the propensity to gamble and investment decisions are correlated. At the aggregate level, individual investors prefer stocks with lottery features, and like lottery demand, the demand for lottery-type stocks increases during economic downturns. In the cross-section, socioeconomic factors that induce greater expenditure in lotteries are associated with greater investment in lottery-type stocks. Further, lottery investment levels are higher in regions with favorable lottery environments. Because lottery-type stocks underperform, gambling-related underperformance is greater among low-income investors who excessively overweight lottery-type stocks. These results indicate that state lotteries and lottery-type stocks attract very similar socioeconomic clienteles.
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This paper reviews the literature on gender differences in economic experiments. In the three main sections, we identify robust differences in risk preferences, social (other-regarding) preferences, and competitive preferences. We also speculate on the source of these differences, as well as on their implications. Our hope is that this article will serve as a resource for those seeking to understand gender differences and to use as a starting point to illuminate the debate on gender-specific outcomes in the labor and goods markets.
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The "gambler's fallacy" is the belief that the probability of an event is lowered when that event has recently occurred, even though the probability of the event is objectively known to be independent from one trial to the next. This paper provides evidence on the time pattern of lottery participation to see whether actual behavior is consistent with this fallacy. Using data from the Maryland daily numbers game, we find a clear and consistent tendency for the amount of money bet on a particular number to fall sharply immediately after it is drawn, and then gradually to recover to its former level over the course of several months. This pattern is consistent with the hypothesis that lottery players are in fact subject to the gambler's fallacy.
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We conduct experiments to analyze investment behavior in decisions under risk. Subjects can bet on the outcomes of a series of coin tosses themselves, rely on randomized ‘experts’, or choose a risk-free alternative. We observe that subjects who rely on the randomized experts pick those who were successful in the past, showing behavior consistent with the hot hand belief. Obviously the term ‘expert’ suffices to attract some subjects. For those who decide on their own, we find behavior consistent with the gambler’s fallacy, as the frequency of betting on heads (tails) decreases after streaks of heads (tails). KeywordsHot hand belief-Gambler’s fallacy-Experimental economics-Decision making under risk JEL ClassificationC91-D81-G10
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This paper investigates two central issues regarding state lotteries. First, analyses of multiple sources of micro-level data demonstrate that household lottery spending is financed primarily by a reduction in non-gambling expenditures, not by a reduction in expenditures on other forms of gambling. The introduction of a state lottery is associated with an average decline of $46 per month, or 2.4 percent, in household non-gambling expenditures. Low-income households reduce non-gambling household expenditures by 2.5 percent on average, 3.1 percent when the state lottery includes instant games. These households experience statistically significant declines in expenditures on food and on rent, mortgage, and other bills. Second, consumer demand for lottery products responds positively to the expected value of the gamble, controlling for other statistical moments and product characteristics, including the nominal top prize amount. This finding is consistent with informed choice among consumers of lottery products, although other forms of irrational or misinformed choice cannot be ruled out.
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This paper estimates the demand for lottery tickets using pooled cross section data that contain individual incomes and extensive information about characteristics. One of the cross sections corresponded to a draw which was a `double rollover' – the jackpot was enhanced by adding the two previous draws' jackpots which had not been won. Together, these datasets provide sufficient observations facing different `prices' to allow us to estimate the `price' elasticity as well as the income elasticity of demand. We estimate Tobit and other specifications and use the estimates to evaluate the welfare effects arising from the introduction of the lottery.
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We develop and evaluate a simple gamble-choice task to measure attitudes toward risk, and apply this measure to examine differences in risk attitudes of male and female university students. In addition, we examine stereotyping by asking whether a person's sex is read as a signal of risk preference. Subjects choose which of five 50/50 gambles they wish to play. The gambles include one sure thing; the remaining four increase (linearly) in expected payoff and risk. Each subject also is asked to guess which of the five gambles each of the other subjects chose, and is paid for correct guesses. The experiment is conducted under three different frames: an abstract frame where the two highest-payoff gambles carry the possibility of losses, an abstract frame with no losses, and an investment frame that mirrors the payoff structure of the former. We find that women are significantly more risk averse than men in all three settings, and predictions of both women and men tend to confirm this difference. While average guesses reflect the average difference in choices, only 27 percent of guesses are accurate, which is slightly higher than chance.
Article
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.
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We examine whether men and women of the same ability differ in their selection into a competitive environment. Participants in a laboratory experiment solve a real task, first under a noncompetitive piece rate and then a competitive tournament incentive scheme. Although there are no gender differences in performance, men select the tournament twice as much as women when choosing their compensation scheme for the next performance. While 73 percent of the men select the tournament, only 35 percent of the women make this choice. This gender gap in tournament entry is not explained by performance, and factors such as risk and feedback aversion only playa negligible role. Instead, the tournament-entry gap is driven by men being more overconfident and by gender differences in preferences for performing in a competition. The result is that women shy away from competition and men embrace it.
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This article is a critical review of risk factors for pathological gambling categorized by demographics, physiological and biological factors, cognitive distortions, comorbidity and concurrent symptoms, and personality symptoms and characteristics. There is also a varia section (availability, parents playing, sensory characteristics, schedules of reinforcement, age of onset, and playing duration). The review found very few well established risk factors for pathological gambling (i.e. more than two studies to support the conclusions). Well established risk factors included demographic variables (age, gender), cognitive distortions (erroneous perceptions, illusion of control), sensory characteristics, schedules of reinforcement, comorbid disorders (OCD, drug abuse), and delinquency/illegal acts. An understanding of risk factors for pathological gambling should enhance prevention and treatment approaches.
Article
This study tests the hypothesis that problem gamblers are more prone to have irrational beliefs and depressed mood than non-gamblers. Irrational beliefs refer to fallacious opinions about probabilities. Gamblers like to believe that chance games (i.e., roulette and lottery) can be controlled and that the outcome of such games is dependent on the patterns of previous outcomes. The empirical material consists of responses to a survey that 302 individuals have answered. Half of the respondents were deemed to be problem gamblers. The results showed that compared to the controls, the problem gamblers were more inclined to show illusion of control due to their skill and reported more depressive mood. The results are discussed in terms of difficulties to know the "hen and the egg" regarding depressive mood, and in terms of intermittent reinforcement to continue gambling.
Article
The "gambler's fallacy" is the belief that the probability of an event is decreased when the event has occurred recently, even though the probability is objectively known to be independent across trials. Clotfelter and Cook (1991, 1993) find evidence of the gambler's fallacy in analysis of data from the Maryland lottery's "Pick 3" numbers game. In the Maryland lottery, the payout to all numbers is equal at $250 on a winning fifty-cent bet, so the gambler's fallacy betting strategy costs bettors nothing. This article looks at the importance of the gambler's fallacy in the New Jersey lottery's three-digit numbers game, a pari-mutual game where a lower amount of total wagering on a number increases the payout to that number. Results indicate that the gambler's fallacy exists among bettors in New Jersey, although to a lesser extent than among those in Maryland. Copyright 1994 by Kluwer Academic Publishers
Article
This paper is concerned with the behaviour of lottery players when they get to choose their own numbers. Most lotto players do not pick combinations at random, but prefer more idiosyncratic techniques when they fill in the play grid. This is highlighted when the actual distribution of combinations for a single draw in the UK National Lottery is examined. A new model of gambler choice is developed and specified, and the resulting distribution of combinations fitted to the empirical data. Various implications of the model are discussed, such as the expected value of lotto tickets for different types of players. Copyright 1998 by Kluwer Academic Publishers
Article
We examine two departures of individual perceptions of randomness from probability theory: the hot hand and the gambler's fallacy, and their respective opposites. This paper's first contribution is to use data from the field (individuals playing roulette in a casino) to demonstrate the existence and impact of these biases that have been previously documented in the lab. Decisions in the field are consistent with biased beliefs, although we observe significant individual heterogeneity in the population. A second contribution is to separately identify these biases within a given individual, then to examine their within-person correlation. We find a positive and significant correlation across individuals between hot hand and gambler's fallacy biases, suggesting a common (root) cause of the two related errors. We speculate as to the source of this correlation (locus of control), and suggest future research which could test this speculation.
Article
This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection as well as empirical evidence on the effects of patent rights. Then, the second part considers the international aspects of IPR protection. In summary, this paper draws the following conclusions from the literature. Firstly, different patent policy instruments have different effects on R&D and growth. Secondly, there is empirical evidence supporting a positive relationship between IPR protection and innovation, but the evidence is stronger for developed countries than for developing countries. Thirdly, the optimal level of IPR protection should tradeoff the social benefits of enhanced innovation against the social costs of multiple distortions and income inequality. Finally, in an open economy, achieving the globally optimal level of protection requires an international coordination (rather than the harmonization) of IPR protection.
Article
This paper investigates the impact of international migration on technical efficiency, resource allocation and income from agricultural production of family farming in Albania. The results suggest that migration is used by rural households as a pathway out of agriculture: migration is negatively associated with both labour and non-labour input allocation in agriculture, while no significant differences can be detected in terms of farm technical efficiency or agricultural income. Whether the rapid demographic changes in rural areas triggered by massive migration, possibly combined with propitious land and rural development policies, will ultimately produce the conditions for a more viable, high-return agriculture attracting larger investments remains to be seen.
The psychology of lottery gambling The hot hand belief and the gambler’s fallacy in investment decisions under risk
  • M Griffiths
  • R Wood
Journal of Public Economics, 72:99–120. Griffiths, M. and Wood, R. (2001). The psychology of lottery gambling. International Gambling Studies, 1:27–45. Huber, J., Kirchler, M., and Stöckl, T. (2010). The hot hand belief and the gambler’s fallacy in investment decisions under risk. Theory and Decision, 68: 445-462
Predicting lotto numbers. CentER Discussion Paper
  • C Jørgensen
  • S Suetens
  • J R Tyran
Jørgensen, C., Suetens, S., Tyran, J.R., 2011. Predicting lotto numbers. CentER Discussion Paper, 2011–2033.
118– 124 Table 2 Regression results on gender and the gambler's fallacy. Dependent Var. = Bet Specification (1) Specification (2) Marginal effect p-Value Marginal effect p-Value
  • S Suetens
  • J.-R Tyran
S. Suetens, J.-R. Tyran / Journal of Economic Behavior & Organization 83 (2012) 118– 124 Table 2 Regression results on gender and the gambler's fallacy. Dependent Var. = Bet Specification (1) Specification (2) Marginal effect p-Value Marginal effect p-Value Male 0.085 <0.001 0.084 <0.001