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Viliam comments on Open thread, Nov. 23 - Nov. 29, 2015 - Less Wrong Discussion

5 Post author: MrMind 23 November 2015 07:59AM

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Comment author: AstraSequi 25 November 2015 02:24:34AM *  2 points [-]

I just found out about the “hot hand fallacy fallacy” (Dan Kahan, Andrew Gelman, Miller&Sanjuro paper) as a type of bias that more numerate people are likely more susceptible to, and for whom it's highly counterintuitive. It's described as a specific failure mode of the intuition used to get rid of the gambler's fallacy.

I understand the correct statement like this. Suppose we’re flipping a fair coin.

*If you're predicting future flips of the coin, the next flip is unaffected by the results of your previous flips, because the flips are independent. So far, so good.

*However, if you're predicting the next flip in a finite series of flips that has already occurred, it's actually more likely that you'll alternate between heads and tails.

The discussion is mostly about whether a streak of a given length will end or continue. This is for length of 1 and probability of 0.5. Another example is

...we can offer the following lottery at a $5 ticket price: a fair coin will be flipped 4 times. if the relative frequency of heads on flips that immediately follow a heads is greater than 0.5 then the ticket pays $10; if the relative frequency is less than 0.5 then the ticket pays $0; if the relative frequency is exactly equal to 0.5, or if no flip is immediately preceded by a heads, then a new sequence of 4 flips is generated. While, intuitively, it seems like the expected payout of this ticket is $0, it is actually $-0.71 (see Table 1). Curiously, this betting game may be more attractive to someone who believes in the independence of coin flips, rather than someone who holds the Gambler’s fallacy.

Comment author: Viliam 25 November 2015 09:33:42AM *  1 point [-]

However, if you're predicting the next flip in a finite series of flips that has already occurred, it's actually more likely that you'll alternate between heads and tails.

...because heads occurring separately are on average balanced by heads occurring in long sequences; but limiting the length of the series puts a limit on the long sequences.

In other words, in infinite sequences, "heads preceeded by heads" and "heads preceeded by tails" would be in balance, but if you cut out a finite subsequence, if the first one was "head preceeded by head", by cutting out the subsequence you have reclassified it.

Am I correct, or is there more?

Comment author: gjm 25 November 2015 02:13:29PM 1 point [-]

I don't think this is correct. See my reply to AstraSequi.

(But I'm not certain I've understood what you're proposing, and if I haven't then of course your analysis and mine could both be right.)

Comment author: Viliam 25 November 2015 02:38:51PM *  0 points [-]

Oops, you're right.

Using the words from my previous comment, now the trick seems to be that 'heads occurring separately are on average balanced by heads occurring in long sequences' -- but according to the rules of the game, you get only one point of reward for a long sequence, while you could get multiple punishments for the separately occuring heads, if they appear in different series. Well, approximately.