Predicting Lotto Numbers: A natural experiment on the gambler’s fallacy and the hot hand fallacy

TY - JOUR

T1 - Predicting Lotto Numbers

T2 - A natural experiment on the gambler’s fallacy and the hot hand fallacy

AU - Suetens, Sigrid

AU - Galbo-Jørgensen, Claus B.

AU - Tyran, Jean-Robert Karl

N1 - JEL codes: D03, D81, D84

PY - 2016

Y1 - 2016

N2 - 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’.

AB - 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’.

KW - Faculty of Social Sciences

KW - D03

KW - D81

KW - D84

U2 - 10.1111/jeea.12147

DO - 10.1111/jeea.12147

M3 - Journal article

SN - 1542-4774

VL - 14

SP - 584

EP - 607

JO - Journal of the European Economic Association

JF - Journal of the European Economic Association

IS - 3

ER -