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Title
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Judgment error in lottery play : when the hot hand meets the gambler’s fallacy
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Author
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Abstract
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| We demonstrate that lottery markets can exhibit the“hot-hand”phenomenon,in which past winning numbers tend to have a greater share of the betting proportion infuture draws even though past and future events are independent. This is surprising asprevious works have instead documented the presence of an opposite effect, the“gam-bler’s fallacy”in the U.S. lottery market. The current literature also suggests that thegambler’s fallacy prevails when random numbers are generated by mechanical devices,such as in lottery games. We use two sets of naturally occurring data to show that both thegambler’s fallacy and the hot-hand fallacy can exist in different types of lottery games. Wethen run online experimental studies that mimic lottery games with one, two, or threewinning numbers. Our experimental results show that the number of winning prizesimpacts behavior. In particular, whereas a single-prize game leads to a strong presence ofthe gambler’s fallacy, we observe a significant increase in hot-hand behavior in multiple-prize games with two or three winning numbers. |
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Language
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English
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Source (journal)
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Management science / Institute for Operations Research and the Management Sciences [Providence, R.I.] - Providence, R.I., 1954, currens
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Publication
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Providence, R.I.
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Institute for Operations Research and the Management Sciences
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2019
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ISSN
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0025-1909
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1526-5501
[online]
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DOI
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10.1287/MNSC.2018.3233
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Volume/pages
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(2019)
, p. 1-19
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ISI
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000514824600018
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Full text (Publisher's DOI)
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Full text (open access)
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