An empirical investigation of wagering behavior in a large sample of slot machine gamblers

Abstract

Using individual transaction gambling data from a casino, we examine the existence of positively or negatively autocorrelated betting behavior in a panel of 42,669 gamblers observed over a period of 108 consecutive days encompassing over 17 million slot machines plays. The statistical analysis suggests that gamblers increase their bet sizes significantly more after win streaks, with the largest increase occurring after three wins in a row. This increase in bet size following win streaks remains significant after variables are introduced for demographics, wealth, habit, house money effects, time spent gambling and account balance, gambling excitement, and player fixed effects. Although ultimately we cannot definitively separate out the influence of win streaks from wealth effects, increasing the amount bet following a win streak is not inconsistent with a hot hand belief that another win is more likely on the next spin.