Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcast
  • Managing the Future of Work Podcast
  • About Us
  • Book
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Podcasts
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    Making the Gambler’s Fallacy Disappear: The Role of Experience
    16 Oct 2008Working Paper Summaries

    Making the Gambler’s Fallacy Disappear: The Role of Experience

    by Gregory M. Barron and Stephen Leider
    The Gambler's Fallacy refers to the belief that chance is a self correcting process. The longer the random run of one outcome, the stronger the belief that the opposite outcome is due to appear. This paper asks whether the way we acquire information, by sequential experience or by simultaneous description, plays a critical role in the emergence of the bias in a binary prediction task (betting on red or black roulette outcomes, for example). The results show that the fallacy only occurs when decision makers experience outcomes over time and not when past outcomes are revealed all at once. The question is interesting since several recent papers on decisions from experience and descriptions suggest that the way people acquire information can have a significant effect on behavior. Key concepts include:
    • This paper's main contribution is in delineating a boundary condition for the emergence of a well-known cognitive bias.
    • Taken together, results suggest that qualitatively different processes are engaged when people encounter information sequentially over time.
    LinkedIn
    Email

    Author Abstract

    Recent papers have demonstrated that the way people acquire information about a decision problem, by experience or by abstract description, can affect their behavior. We examine the role of experience over time in the emergence of the Gambler's Fallacy in binary prediction tasks. Theories of the Gambler's Fallacy and models of binary prediction suggest that recency bias, elicited by experience over time, may be necessary for the fallacy to emerge. Experiment 1 compares a condition where participants sequentially predict the colored outcomes of a roulette wheel with a condition where the wheel's past outcomes are presented all at once. Subjects are yoked so that the same history of outcomes is observed in both conditions. The results reveals a tendency towards negative recency when outcomes are experienced that disappears when the same outcomes are presented all at once. Experiment 2 examines a boundary condition where outcomes are presented sequentially in an automatic fashion without intervening predictions. Here too, the Gambler's Fallacy emerges suggesting that it is the mere presentation of information over time that gives rise to the bias. Implications are discussed.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: September 2008
    • HBS Working Paper Number: 09-029
    • Faculty Unit(s): Negotiation, Organizations & Markets
      Trending
        • 02 Feb 2023
        • Research & Ideas

        Why We Still Need Twitter: How Social Media Holds Companies Accountable

        • 27 Jan 2023
        • Op-Ed

        Have We Lost Sight of Integrity?

        • 17 Jan 2023
        • In Practice

        8 Trends to Watch in 2023

        • 20 May 2019
        • Research & Ideas

        Activist CEOs Are Rising Up—and Their Customers Are Listening

        • 25 Jan 2022
        • Research & Ideas

        More Proof That Money Can Buy Happiness (or a Life with Less Stress)

    Find Related Articles
    • Economics
    • Decision Making
    • Problems and Challenges

    Sign up for our weekly newsletter

    Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
    ǁ
    Campus Map
    Harvard Business School Working Knowledge
    Baker Library | Bloomberg Center
    Soldiers Field
    Boston, MA 02163
    Email: Editor-in-Chief
    →Map & Directions
    →More Contact Information
    • Make a Gift
    • Site Map
    • Jobs
    • Harvard University
    • Trademarks
    • Policies
    • Accessibility
    • Digital Accessibility
    Copyright © President & Fellows of Harvard College