Abstract
Human choice under uncertainty is influenced by erroneous beliefs about randomness. In simple binary choice tasks, such as red/black predictions in roulette, long outcome runs (e.g. red, red, red) typically increase the tendency to predict the other outcome (i.e. black), an effect labeled the “gambler's fallacy.” In these settings, participants may also attend to streaks in their predictive performance. Winning and losing streaks are thought to affect decision confidence, although prior work indicates conflicting directions. Over three laboratory experiments involving red/black predictions in a sequential roulette task, we sought to identify the effects of outcome runs and winning/losing streaks upon color predictions, decision confidence and betting behavior. Experiments 1 (n = 40) and 3 (n = 40) obtained trial-by-trial confidence ratings, with a win/no win payoff and a no loss/loss payoff, respectively. Experiment 2 (n = 39) obtained a trial-by-trial bet amount on an equivalent scale. In each experiment, the gambler's fallacy was observed on choice behavior after color runs and, in experiment 2, on betting behavior after color runs. Feedback streaks exerted no reliable influence on confidence ratings, in either payoff condition. Betting behavior, on the other hand, increased as a function of losing streaks. The increase in betting on losing streaks is interpreted as a manifestation of loss chasing; these data help clarify the psychological mechanisms underlying loss chasing and caution against the use of betting measures (“post-decision wagering”) as a straightforward index of decision confidence. © 2014 The Authors. Journal of Behavioral Decision Making published by John Wiley & Sons Ltd.
Highlights
Gambling games typically involve a series of independent events such as successive draws in a lottery or the spins of a slot machine or roulette wheel
Confidence ratings were significantly predicted by run length, β(SE) = 0.14 (0.04), p < .001, such that longer runs were associated with increased confidence, OR = 1.15, 95% confidence interval (95% CI) [1.06, 1.25]
Betting behavior was significantly predicted by run length, β(SE) = 0.35 (0.05), p < .001, OR = 1.41, 95% CI
Summary
Gambling games typically involve a series of independent events such as successive draws in a lottery or the spins of a slot machine or roulette wheel. The dominant account of this effect proposes that humans expect small sequences to be representative of the overall distribution from which the events are drawn. This “belief in the law of small numbers” is considered an example of the representativeness heuristic (Kahneman & Tversky, 1972). Related accounts discuss how the scarcity of truly independent events in the real world may lead to a folk intuition that gambling games involve sampling without replacement, in which the gambler’s fallacy would be a reasonable
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
