The Price of Luck

Silvia Bou, Jordi Brandts, Magda Cayón and Pablo Guillen

No 2013-10, Working Papers from University of Sydney, School of Economics

Abstract: We find that the vast majority of students taking an advanced undergraduate finance course show a preference for luck in a classroom experiment. In Phase I of the experiment part of the students, group A, were asked to guess a coin toss five times in a row. In Phase II the rest of the students, group B, were given 10 EUR to bet on some of the Group A students taking a second go at guessing a sequence of five coin tosses (Phase III). Group B students' bets were by default allocated to the worse performing student in Phase I. Switching to better performing Group A students was costly. A total of 23 out of 28 students were willing to pay for switching and thus showed a preference for luck.

Keywords: experiments; hot hand fallacy; Decision heuristics (search for similar items in EconPapers)
Date: 2013-06, Revised 2015-02
New Economics Papers: this item is included in nep-cbe and nep-exp
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