Chapter 19: The economic psychology of gambling Flashcards
Why do people participate in lotteries since, from an odds perspective, it does not earn money (4)
(1) Prospect theory - people overestimate the low odds of winning. People are just not able to estimate how tiny winning odds actually are
(2) Decision-by-sampling -> people are likely to use a small chance that they have retained in memory as substitute for a minuscule chance they have never encountered before (overestimation)
(3) Availability heuristic –> people’s attention may have been drawn to news coverage of a number of highly impressive jackpot wins, leading to overestimation of odds
(4) The bigger the jackpot, the more winners are reported, the more people buy lottery tickets
What are biases in lotteries? (4)
(1) Overestimation of odds
(2) Representativeness heuristic –> people expect wining numbers to look random, thus they do not pick numbers that don’t seem random
(3) Illusion of control –> people overestimate their ability to pick winning numbers, however we prefer to choose our own numbers
(4) Sort of gamblers fallacy –> if certain numbers have recently appeared among the winning ones, people don’t pick them. This is useless because the process is entirely random so it has nothing to do with previous results
What can you tell about scratch cards? (4)
(1) The results are instant
(2) More easily addicted; direct reveal of results
(3) Near-miss effects with scratch cards
(4) odd change due to claimed cards after initial print
Why do experts usually win more in sports-betting games than non-experts?
Because they tend to bet more safe (expert strategy) compared to the average joe
Why is sports-betting very tempting?
People feel empowered and confident because they can bet on something they have knowledge off, however, their performance does not reflect this
What is the hot-hand effect in gambling?
Safer odds are more likely to produce a win and risky odds are more likely to reduce a loss. People might have won more, but won’t have made more profit due to safe betting
What are the 3 different types of problem gamblers and some key characteristics?
(1) Gamblers with poor judgement and decision making
- Loss chasing, easy to cure, no psychopathology
(2) Gamblers to satisfy emotional needs
- Family history, emotional and biologically vulnerable, escape for problems
(3) Neurological/neurochemical dysfunctions
- Weak control over own behavior
- Not only problems in gamboling but often also substance abuse
What is the martingale strategy in gambling?
Double or quit after each loss until you break even or have a small profit
Explain loss-chasing by using prospect theory
(1) People have diminished sensitive to accumulating outcomes
(2) The function is steeper for losses
(d) People with gambling disorder have diminished loss aversion
Small probabilities
Explain loss-chasing by neurocognitive aspects?
(1) Inhibition; people don’t consider everything and gamble on risky decisions
(2) Urgency -> loss chasing induces negative emotions as result of gambling loss
(3) Compulsion to gamble –> disfunction, disengagement
Gambling is associated with (6?)
(1) Increased financial stress
92) Decreased financial inclusion
93) Decreased financial planning
(4) Negative lifestyle
(5) Negative health and wellbeing, more unemployment
(6) Negative leisure and interest
Why are near-misses so important in gambling and loss-chasing?
Near misses cause brain activity that overlaps with a win-outcome, thus our brain processes it as an reward. Makes it very difficult to stop at a near miss, there is a strong wish to continue gambling.
What is gamblers fallacy?
The wrong thought that, if an event happened in the past, it will not occur in the future. You believe chances are dependent when they in fact are independent. False misjudgment that luck will return some day, that winning numbers won’t win again and so forth
What is gambling disorder according to DSM-5?
Presistant and recurrent maladaptive gambling behavior leading to clinically significant impairment or distress
