Decision-Making Under the Gambler's Fallacy: Evidence from Asylum Judges, Loan Officers, and Baseball Umpires

Posted: 22 Jun 2015 Last revised: 20 Apr 2020

See all articles by Daniel L. Chen

Daniel L. Chen

Directeur de Recherche, Centre National de la Recherche Scientifique, Toulouse School of Economics, Institute for Advanced Study in Toulouse, University of Toulouse Capitole, Toulouse, France

Tobias J. Moskowitz

Yale University, Yale SOM; AQR Capital; National Bureau of Economic Research (NBER)

Kelly Shue

Yale School of Management; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: March 11, 2015

Abstract

We find consistent evidence of negative autocorrelation in decision-making that is unrelated to the merits of the cases considered in three separate high-stakes settings: refugee asylum court decisions, loan application reviews, and baseball umpire calls. The evidence is most consistent with the law of small numbers and the gambler's fallacy -- that people underestimate the likelihood of sequential streaks occurring by chance -- leading to negatively autocorrelated decisions that result in errors. The negative autocorrelation is stronger among more moderate and less experienced decision-makers, following longer streaks of decisions in one direction, when the current and previous cases share similar characteristics or occur close in time, and when decision-makers face weaker incentives for accuracy. Alternative explanations for the negative autocorrelation such as sequential contrast effects, quotas, learning, or preferences to treat all parties fairly, are less consistent with the evidence.

Keywords: gambler's fallacy, law of small numbers, decision-making

Suggested Citation

Chen, Daniel L. and Moskowitz, Tobias J. and Shue, Kelly, Decision-Making Under the Gambler's Fallacy: Evidence from Asylum Judges, Loan Officers, and Baseball Umpires (March 11, 2015). Quarterly Journal of Economics, 131(3): 1181-1241, 2016, Available at SSRN: https://ssrn.com/abstract=2621262

Daniel L. Chen (Contact Author)

Directeur de Recherche, Centre National de la Recherche Scientifique, Toulouse School of Economics, Institute for Advanced Study in Toulouse, University of Toulouse Capitole, Toulouse, France ( email )

Toulouse School of Economics
1, Esplanade de l'Université
Toulouse, 31080
France

Tobias J. Moskowitz

Yale University, Yale SOM ( email )

New Haven, CT 06520
United States

HOME PAGE: http://som.yale.edu/tobias-j-moskowitz

AQR Capital ( email )

Greenwich, CT
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kelly Shue

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
1,164
PlumX Metrics