The influence of subjective beliefs in luck on the decision-making under risk: TV show analysis

Sofiia Dolgikh

Applied Econometrics, 2019, vol. 56, 74-98

Abstract: This paper investigates into the questions of subjective beliefs in luck evaluation and their influence on the individual behavior. Based on the TV show «Deal or Not a Deal» participants behavioral data decision making under risk model with subjective probabilities has been provided. Model parameters are estimated via nonlinear binary regression with heteroscedastic random error. The results are as follows. First, there is statistical evidence that individuals subjective believes in luck influence their decision making. Second, risk-aversion parameters estimates may be strongly biased when parameters responsible for luck evaluation are omitted. Third, hot hand fallacy effect has been revealed: according to model parameters estimates lucky (unlucky) events make people think themselves as luckier (unluckier) persons. These results robustness has been shown by the means of model parameters reevaluation under different random error distribution assumption and sample division according to gender and education level.

Keywords: decision-making; expected utility theory; prospect theory; luck; hot hand fallacy; gambler’s fallacy. (search for similar items in EconPapers)
JEL-codes: C25 D81 (search for similar items in EconPapers)
Date: 2019
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