Planned versus Actual Betting in Sequential Gambles

Anecdotal evidence indicates that in a gambling environment, consumers may end up betting more than they had initially planned. The authors assess this phenomenon in a series of three experiments, in which people are exposed to sequential and fair gambles in a two-stage process (planned and actual bets). The results show that in the planning phase, people behave conservatively, betting on average less after an anticipated loss and the same amount after an anticipated gain. However, after experiencing an actual loss in the first gamble, people bet in a subsequent gamble significantly more than they had initially planned, whereas on average, there were no observable differences from the plan after an actual gain. The reason for such asymmetry is due in part to people's tendency to underestimate, at the planning phase of the gamble, the impact of negative emotions in betting decisions during the actual phase of the gamble.