Decision-Making Warning Flag 1a – The Gambler’s Fallacy
“The Gambler’s Fallacy, also known as the Monte Carlo Fallacy, is the false belief that the probability of an event in a random sequence is dependent on preceding events, its probability increasing with each successive occasion on which it fails to occur.”
Seated at a roulette table, a gambler must decide on what color to place his next bet, red or black. He knows there is a 50 percent chance of getting either red or black and that the first four spins of the wheel yielded all reds. The gambler reasons that because half of all spins should result in black and the first four were red, it is more likely the fifth spin of the roulette wheel will be black and places his bet. While his logic appears reasonable, the roulette player has just fallen victim to the Gambler’s Fallacy.
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Additional insight to the warning signs, causes, and results of logic errors can be found in the StrategyDriven website feature: Decision-Making Warning Flag 1 – Logic Fallacies Introduction.
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