Gambler’s Fallacy
Sample Representativeness
Conditional Probability
The Outcome Interpretation of Probabilities
Equiprobability Bias
Gambler’s Fallacy (or the Law of Averages)
The Misconception:
This is the belief that chance processes are self-correcting in the short run. Suppose one
observes 8 heads out of tosses. What is the probability that the next toss is a head? If
one believes in the Gambler’s fallacy, then one would think that the next toss is more
likely to be a head. Similarly, a gambler with this belief who is going through a bad
losing streak at a casino thinks he’s going to win in future tosses.