Rational and Irrational Belief in the Hot Hand: Evidence from "Jeopardy!"

Abstract

For several decades, researchers and practitioners have wondered whether a "hot hand" exists in domains with repeated, human-controlled trials. Using a comprehensive play-by-play dataset from the game show "Jeopardy!", we demonstrate that contestants strongly believe in a hot hand effect as reflected in their wagering decisions during gameplay. In parallel, we find that a small hot hand effect also exists in contestants' actual performances. We then quantify contestants' "hot hand bias" (the degree to which their belief is irrational), finding that they overestimate the true effect by up to an order of magnitude. We also find that more successful contestants, as well as those with more quantitative and analytical training, exhibit lower levels of bias. Our paper reconciles robust findings of belief in a hot hand with a growing consensus that a small effect often exists in reality and investigates foundational mechanisms underlying these effects.

Keywords: hot hand, behavioral economics, quantitative marketing, judgment and decision making, behavioral finance, sports economics, biased beliefs

JEL Classification: D08, D84, D91, G04