Listening to Dan Ariely's podcast, "Arming the Donkeys", pointed me to this paper, Fear and Loathing in Las Vegas: Evidence from Blackjack Tables Bruce I. Carlin, UCLA David Robinson, Duke, in which Robinson and Carlin study data on blackjack players and find that mistakes of a conservative, risk-averse nature are four times more likely than overly-aggressive mistakes, even among people who have specifically chosen to risk money at the gaming tables.

Psychologists study regret primarily by measuring subjects' attitudes in laboratory experiments. This does not shed light on how expected regret affects economic actions in market settings. To address this, we use proprietary data from a blackjack table in Las Vegas to analyze how expected regret affects peoples' decisions during gambles. Even among a group of people who choose to participate in a risk-taking activity, we find strong evidence of an economically significant omission bias: players incur substantial losses by playing too conservatively. This behavior is prevalent even among large stakes gamblers, and becomes more severe following previous aggressive play, suggesting a rebound effect after aggressive play.

Dan Ariely's podcast: (The link at Dan Ariely's site will open up iTunes for the podcast. This specific interview is the 11/10/2008 podcast.)


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