What Is The Gambler’s Fallacy In Behavioral Economics?

The Gambler’s Fallacy is a cognitive bias that occurs when people believe that the likelihood of an event occurring is influenced by previous events. For example, if a coin has been flipped and has landed on heads several times in a row, someone who is experiencing the Gambler’s Fallacy may believe that the next flip is more likely to be tails because it has “been too long” since the last tails flip. In reality, the likelihood of the coin landing on heads or tails on any given flip is always 50%, regardless of previous flips. This bias can lead people to make poor decisions, such as continuing to play a game of chance even when they are losing, because they believe that they are due for a win. The Gambler’s Fallacy is related to the concept of the hot hand fallacy, which is the belief that a person who is currently having success with a random event is more likely to continue having success.

Related Behavioral Economics Terms