6 What do Beginner's luck and Leprechun gold have in common?
Sam was off to a great start at the Las Vegas Casinos. Spurred by beginner's luck, he continues gambling away more and more money till his more cautious friends decide to hold him back. But does beginner's luck really exist?
A more logical explanantion is that only people who had good luck to begin with, actually continue gambling. If Sam started out with Jason, but Jason lost money the first two times while Sam didn't, it's likely that Jason will stop the game while Sam will continue. Of course, since Jason dropped out early on, we won't notice him. We do notice Sam who keeps gambling on with progressively higher amounts. Like Sam, we fall prey to the illusion of beginner's luck as we congratulate him on his initial winnings only to start regretting it later, when the winning streak starts getting dotted with mammoth losses. …show more content…
Among two student groups, students in Group A learn that they have won $30. They could choose to take part in the following coin toss: they win $9 if it is tails, but lose the same amount, if heads. Students in Group B learn they have won nothing, but they could choose between receiving $30 or taking part in a coin toss in which heads won them $21 and tails secured $39.
Though the expected value for both groups is $30, 70% of students in the Group A decide to take the risk, while only 43% in Group B do! [link 6]
Economist Richard Thaler discovered this effect, dubbed the house money effect: We treat money that we win, discover or inherit much more frivolously than hard-earned cash.
Aren't we likely to spend the $40, 000 we earned in a lottery on a luxury cruise? But the same $40, 000, if earned after a year of hard work would go to investments, or renovating our houses. Maybe we should start offering fair treatment to our money too irrespective of its context!
8 It is pertinent to dig up the graveyard before you decide to
Sam was off to a great start at the Las Vegas Casinos. Spurred by beginner's luck, he continues gambling away more and more money till his more cautious friends decide to hold him back. But does beginner's luck really exist?
A more logical explanantion is that only people who had good luck to begin with, actually continue gambling. If Sam started out with Jason, but Jason lost money the first two times while Sam didn't, it's likely that Jason will stop the game while Sam will continue. Of course, since Jason dropped out early on, we won't notice him. We do notice Sam who keeps gambling on with progressively higher amounts. Like Sam, we fall prey to the illusion of beginner's luck as we congratulate him on his initial winnings only to start regretting it later, when the winning streak starts getting dotted with mammoth losses. …show more content…
Among two student groups, students in Group A learn that they have won $30. They could choose to take part in the following coin toss: they win $9 if it is tails, but lose the same amount, if heads. Students in Group B learn they have won nothing, but they could choose between receiving $30 or taking part in a coin toss in which heads won them $21 and tails secured $39.
Though the expected value for both groups is $30, 70% of students in the Group A decide to take the risk, while only 43% in Group B do! [link 6]
Economist Richard Thaler discovered this effect, dubbed the house money effect: We treat money that we win, discover or inherit much more frivolously than hard-earned cash.
Aren't we likely to spend the $40, 000 we earned in a lottery on a luxury cruise? But the same $40, 000, if earned after a year of hard work would go to investments, or renovating our houses. Maybe we should start offering fair treatment to our money too irrespective of its context!
8 It is pertinent to dig up the graveyard before you decide to