AEM414 - problem set two_Solutions

AEM414 - problem set two_Solutions - Problem Set 2 1. The...

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Problem Set 2 1. The article discusses the amazing winning streak that a major league baseball team, the Colorado Rockies went on heading into the playoffs this year. It also talks about hypothetical playoff success based on such a streak. This is obviously mere speculation, however a large majority of individuals give such occurrences much more weight based on the recent successes. This distorted perception of reality, in which fans and players alike believe that recent success is a very accurate predictor of success in the near future is commonly referred to as the hot hand bias. Despite the fact that each game is separate and distinct, and the chance of winning one has little to nothing to do with the most recent victories or losses, individuals typically think and act irrationally. Moreover, when such a team displays dominance as the Rockies did over the past month or so, it is believed that they have more control over the situation than is true in actuality. This false belief of control is commonly referred to as just that, an illusion of control. People are convinced that the winning streak and recent dominance reflect the fact that the Rockies may indeed have more control over their destinies than what really exists. There is an abundance of statistics available regarding the past occurrences of such streaks, and the outcomes of each team’s respective season, along with definitive research disproving any notion of the hot hand, and yet this accurate and factual information is regularly discounted. The downplaying of fact and the calculated probabilities in relation to current information that may point one to a different conclusion is often referred to as representativeness. This is yet another anomaly that provides fans and athletes alike with a sense of false hope in many instances, however sad and depressing that may be. In order to take advantage of this phenomenon of people reading too far into current streaks and trends, one could travel down many roads. Each of these would probably involve the sale of merchandise for respective streaky teams or placing bets on the chances of a team winning in the playoffs or something to that extent. Both modes would definitely take advantage of the hot hand bias and representativeness that is pervasive throughout the majority of the country. People simply tend to become fans and supporters of teams with recent success and so sales of memorabilia and other items would increase, even if prices were hiked up, which would further increase profits. In terms of betting, you can play the numbers. People will be overconfident in
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This homework help was uploaded on 02/20/2009 for the course AEM 4140 taught by Professor Schulze,w. during the Fall '08 term at Cornell University (Engineering School).

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AEM414 - problem set two_Solutions - Problem Set 2 1. The...

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