Betting On Coin Tosses, And The Previous Five Outcomes Essay

1351 Words Dec 2nd, 2016 6 Pages
Consider a person betting on coin tosses, and the previous five outcomes were all Heads. Under the gambler’s fallacy, the person would think that the next outcome is most likely to be Tails and would then bet for Tails. The gambler’s fallacy is the false belief in “negative autocorrelation of a non-autocorrelated random sequence of outcomes” (Sundali & Croson, 2006). In simpler words, it is the tendency to perceive an outcome as less likely to occur if it occurred more frequently than normal previously. The most famous case of gambler’s fallacy occurred on August 18th, 1913, when the ball fell in black 26 times in a row during a roulette game in Monte Carlo Casino. Under the gambler’s fallacy, gamblers lost millions of francs betting against black. Because of this famous case, the gambler’s fallacy is also called the Monte Carlo Fallacy.
In contrast to gambler’s fallacy, the hot hand is the false belief in “positive autocorrelation of a non-autocorrelated random sequence of outcomes” (Sundali & Croson, 2006). For instance, in a basketball game, if a player makes a couple of successful shots in a row, audiences would tend to believe that “success breeds success,” and “subsequent success is more likely” (Tversky & Gilovich, 1989). Although the hot hand may seem like the simple opposite of gambler’s fallacy, the gambler’s fallacy is the false belief of the random process while the hot hand is the false belief outcomes of the individual. Under the hot hand fallacy, individuals…

Related Documents