The Gambler`s fallacy

The Gambler‘s fallacy
The Gambler‘s fallacy could occur when we have interdepedent
trials of a random process (e.g. throwing a coin). If then devations
occur that differ significantly from the expected, a boundedly
rational individual could assume that these deviations will be
evened out in the further trails.
So coming back to our coin example - if after throwing a coin 5
times it was always heads showing up than a boundedly rational
individual would assume that for the next trial the probability that
tails is showing up is bigger. However a coin has no memory! So the
probability is always 50% without any regard on what happened
The same phenomenom could be observed when poeple are playing
roulette in casion and decide for a certain colour (red or black).
Refer to the St. Petersberg Paradoxon.
Gruppe 5 – Martin Bierey, Alexander Bamberg, Franziska Kroll
Related flashcards
Create flashcards