August 31, 2010
Gamblers who think they have a "hot hand," only to end up walking away with a loss, may nonetheless be making "rational" decisions, according to new research from University of Minnesota psychologists. The study finds that because humans are making decisions based on how we think the world works, if erroneous beliefs are held, it can result in behavior that looks distinctly irrational.
This research, forthcoming in the Proceedings of the National Academy of Sciences (PNAS) "Early Edition," examines the roots of a seemingly irrational human decision strategy that occurs in so-called binary choice tasks, which has perplexed researchers in economics, psychology and neuroscience for decades. In these tasks, subjects are repeatedly asked to choose between two options, with one option having a higher probability of being correct than the other (imagine a biased coin that will land on heads 70 percent of trials, and tails on 30 percent of trials). While the right strategy is to always pick the higher probability option, subjects instead choose the options in proportion to the probability of it being correct.
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