THE 2 FALLACIES OF GAMBLERS - TYPE-I AND TYPE-II

The so-called ''gambler's fallacy'' asserts that gamblers believe mech anical randomizers (such as roulette) exhibit sequential tendencies. I n this paper we introduce another false belief of gamblers, namely the tendency to bet on a winning number under the assumption that the rou lette wheel is biased. We discuss the proper analysis for detecting bi ased numbers and demonstrate empirically that people notoriously under estimate the number of observations needed for a reliable detection of biased numbers. We label this bias as the Type II gambler's fallacy a nd suggest that both types of the fallacy are due to misperceptions of randomness. Implications for real life situations are briefly discuss ed. (C) 1994 Academic Press, Inc.