Research Article 1

ISSN 2321 – 371X

Financial Discipline, Gambler’s Fallacy Commerce Spectrum 8(2) 1-6
© The Authors 2020
and Gambling Addiction among Lottery Reprints and Permissions
Participants sreeragam2017@gmail.com
www.commercespectrum.com

Bibin K. Bhanu1
Research Scholar, P.G & Research Department of Commerce, St. Peter’s College, Kolenchery

Abstract
Humans possess a remarkable ability to differentiate structure from randomness in the environment.
However, this ability appears to be systematically biased. Gambler's Fallacy is an erroneous belief that an
individual has about random gambling successes due to the inaccurate understanding of probability. The
lottery is relatively inexpensive. The promise of a huge jackpot prize made it the most popular form of
gambling among the masses. So naturally, it is seen as a socially acceptable form of gambling. The worst
thing that can happen to a lottery player is getting the addiction factor to the lotteries and it can be serious
trouble. The gambling addiction would be more among the lower class of the society than the above-average
income group and will be more among men than women.
Such gamblers will buy lotteries till they got nothing left in their hand. They will never have many personal savings
and they would even take money from other fruitful investments or charities. Their family will be those who suffer
the most as money will be disappeared every morning. Lotteries can be as addicting as beverages if not controlled.
The majority of them would end up in bankruptcy as the odds of winning the lottery is very less.

Keywords
Gambler’s Fallacy, Gambling Addiction, Financial Discipline, Cognitive Biases.

I. Introduction 1
The Gambler's Fallacy, also known as the Monte
Carlo fallacy or the fallacy of the maturity of
chances, is the mistaken belief that, if something
happens more frequently than normal during a given
period, it will happen less frequently in the future. It
may also be stated as the belief that, if something
happens less frequently than normal during a given
period, it will happen more frequently in the future.
In situations where the outcome being observed is
truly random and consists of independent trials of a
random process, this belief is false. Thus, Gambler's
Fallacy is an erroneous belief that an individual has
about random gambling successes due to the
inaccurate understanding of probability. The fallacy
can arise in many situations but is most strongly
associated with gambling, where it is common
among players.
The Kerala State Lotteries was started in 1967
with the special interest of the then state finance
Minister P.K. Kunju Sahib under E.M. Sankaran
Namboodiripad ministry. It was the first of its kind
in India – fully state-owned and regulated. With the
motto of Viswasthyam, Sutharyam, Janakeeyam
1
Corresponding Author:
Bibin K. Bhanu, Research Scholar, P.G & Research Department
of Commerce, St. Peter’s College, Kolenchery
(reliable, transparent and popular), the Lotteries
Department rolls out seven weekly lotteries –
Pournami, Win-Win, Sthree Sakthi, Akshaya,
Nirmal, Karunya Plus and Karunya – one for each
day of the week. Four of the biggest festivals –
Onam, Vishu, Christmas and Pooja– also get their
special bumper lotteries.
Besides these, there are also two special seasonal
lotteries, the Monsoon and Summer bumper
lotteries. Despite the massive jackpot prizes paid
out, especially in the bumper lotteries, the lottery
business is one of Kerala's biggest cash cows,
drawing thousands of crores to the state exchequer
each year. In 2015-16, the Kerala government
earned ` 7,300 crore by selling lottery tickets, of
which the profit to the exchequer was ` 2,200
crores.
II. Review of literature
The Hindu (2017) A cognitive bias where an
individual believes that an outcome is unlikely to
happen because it has already happened several times
in the past. It is considered a fallacy because the
chances that a random event will occur in the future
does not in any way depend on the frequency of its
occurrence in the past.
2 Financial Discipline, Gambler’s Fallacy and Gambling Addiction among Lottery Participants
Dr Sanju George (2016) reveals that the public risk
of gambling in Kerala has yet been identified. He
also calls for conducting much more research in the
field to raise the profile of gambling as an important
public health issue, and to get it widely
acknowledged as a behaviour with addiction
potential.
Paul Zachariah (2015) points out that the lottery is
something that makes people dream, and exploits
the poorest of the poor. In Kerala, everyone,
including political parties, has let them down, and
they submit themselves to supernatural powers such as
godmen or lotteries, searching luck. There are few
clear answers on why Kerala is so fascinated with
lotteries. “They are imagining a source of redemption”.
III. Significance And Scope of the Study
The Kerala State Lotteries certainly have a claim to
dozens of „rags to riches‟ stories of lady luck
shining on those desperately in need. But for every
one of these success stories, there are lakhs of others
who dutifully sink in hundreds every month hoping
for that elusive victory. It is this habituation, which
soon grows into an addiction that many decry about
the lottery system in the state. It survives by selling
impossible dreams to the poor and comparing the
faith in lotteries to the belief in the supernatural
„miracles‟ of godmen. Thus, there is a great deal of
social cost associated with lotteries in Kerala, as it is
a form of legalized plunder from the poor, who are
the main participants of the system. Due to all these
reasons, a study on the Financial Discipline and
Gambling Behaviour of the participants of Kerala
State Lotteries, especially the regular participants, is
found to be significant.
IV. Objectives of the Study
The study is conducted with the overall objective of
understanding the link between Financial Discipline,
Gambler‟s Fallacy and Gambling Addiction. Keeping
it in mind the following specific objectives were set:
1) To examine the factors that result in the
increased spending on lotteries by lottery
participants.
2) To understand the level of Gambling
Addiction, Gambler‟s Fallacy and Financial
Discipline among lottery participants.
3) To know whether there is any relationship
between Financial Discipline, Gambler‟s
Fallacy and Gambling addiction among
individuals in the area of study.
V. Database and methodology
Population
In this study, the population includes lottery
participants of all age groups, both male and female,
with different educational qualifications and
occupations, residing in both Municipal Councils
and Panchayats of Alappuzha District.
Sample Design
Since the population is large in numbers, it was
proposed to use a representative sample for the
study. For that purpose, 120 lottery participants
were taken as the sample based on a two-stage
sampling process. In the first stage, the lottery
method was used to select 3 Municipal Councils
from 6 the Municipal Councils and 9 Panchayats
from the 72 Panchayats of Alappuzha district.
Quotas were allotted to the set of Municipal
Councils (24 in numbers) and the set of Panchayats
(96 in numbers) based on population ratio of
Municipal Councils and Panchayats in Alappuzha
district. In the second stage, intercept survey method
was used to collect data from the respondents,
whereby they were met at the places of purchase of
lotteries like shops, peddlers etc. in the above-
mentioned Municipal Councils and Panchayats.
Normality test Jarque-Bera test showed value of
3.43(p =0.179), data set is normal.
Type of Data Source
The study consists of both primary and secondary
data. However, primary data collected from
respondents were used for analysis. Primary data
were collected through questionnaires. Secondary
data were collected from Books, Online Journals,
and Websites etc.
Tools for Data Collection
The Primary data for analysis were collected by
administering a detailed questionnaire, from lottery
participants across Alappuzha District.
Tools for Analysis and Interpretation of Data
The study used tools like mean, standard deviation,
percentages, and correlations etc with the help of SPSS
Software for analysing the primary data collected. The
analysed data were presented in tables and graphs in a
simplified and attractive manner.
VI. Model used for the study
The study proposed to evaluate three major concepts
namely Financial Discipline, Gambling Fallacy and
Gambling Addiction. For measuring Financial
Discipline, a 23-item instrument with 5-point Likert
type scaling techniques ranging from „Never‟ to
„Always‟ (1 point to 5 points) was prepared. The
extracts of a model developed by Leonard and
Williams in 2016, was modified in the context of
Kerala and was used for measuring Gambling Fallacy
and Gambling Addiction. An instrument with 10
objective questions was used to measure Gambler‟s
Fallacy and a 12-item instrument with 4-point scaling
ranging from „Not at all true‟ to „Exactly true‟ (1 point
to 4 points) was used to measure Gambling Addiction.
Bibin K. Bhanu 3

VII. Findings
Table 1: Financial Discipline.
Financial Discipline – Statements Mean SD
I make financial plans about my income, expenditure and savings. 3.24 1.561
I can strictly follow the financial plans I make. 2.91 1.372
I always ensure I get a regular income. 2.88 1.540
I don’t have a habit of spending money before getting it. 3.97 1.437
I compare prices while making purchases. 3.38 1.496
Priority goods are preferred to luxurious goods. 4.34 1.206
I pay my bills for electricity, telephone, rent etc. in the right time. 4.13 1.309
I always limit my expenses within my income. 3.19 1.451
I don’t have a temptation to spend more when I have some extra income. 3.57 1.459
I make regular savings from a portion of my income. 3.08 1.513
I make investments that give me reasonable returns, with limited risk. 2.87 1.561
When unforeseen and sudden expenses arise, I resort to personal savings than loans. 2.83 1.595
I use to borrow only when it is unavoidable. 4.01 1.287
If I take loans, I will consider interest rates and repayment options. 3.11 1.602
If I take loans, I will ensure that I make timely repayments. 4.11 1.180
After borrowing money, I limit my expenses to pay off the loan. 4.03 1.270
My financial decisions and actions help in wealth creation. 3.14 1.502
I have subscribed insurance policy to protect my family. 2.81 1.536
I have well defined plans about retirement. 2.60 1.611
I keep records of how I manage money. 2.80 1.580
I give my family members or loved ones a say in my financial actions. 3.35 1.515
When my financial decisions go wrong, I ask for advices or become more cautious. 3.53 1.478
I am satisfied with the way I manage my money. 3.71 1.337
Overall Financial Discipline 3.37 0.56
Source: Primary data.

The overall Financial Discipline of the Respondents Frequency of Purchase of Lotteries

is measured using the 23 statements listed above with
the help of a five-point scaling tool ranging from
„Never‟ to „Always‟. The reliability testing showed a
Cronbach‟s Alpha of 0.737. The overall Financial
Discipline is found to be 3.37 with a Standard
Deviation of 0.56, which is fairly higher than the
median value 3. It means that, on an average, the
respondents of the study have above average
Financial Discipline.
Out of the 120 respondents, 40 (33.3 percent)
admitted that they purchase lottery tickets „Very
Often‟, 32 of them (26.7 percent) pointed that they
purchase tickets „Often‟ and 38 respondents pointed
that they purchase tickets „Sometimes‟. The rest
engage in lottery play „Rarely‟.

50
40

30

20

10

0
Very Often Sometimes Rarely
Often
Figure (i): Frequency of Lottery Purchase

People tends to purchase lottery tickets to lessen their

Factors motivating Lottery Purchase
financial sufferings rather than the benevolent factors.
Factors that motivate respondents to purchase lottery Respondents also points those advertisements also play
tickets frequently was identified and ranked herewith. a key role in their purchase decision.
4 Financial Discipline, Gambler’s Fallacy and Gambling Addiction among Lottery Participants

Table 2: Factors motivating Lottery Purchase

Reasons for Purchase of Lotteries Rank
I like playing lotteries, as I enjoy the pleasure of gambling 10
I wish to lead a much comfortable lifestyle or pursue certain dreams that I believe I could achieve through winning lotteries. 2
I have huge financial problems which can be solved only through a windfall gain. 3
My income alone cannot ensure financial prosperity of my family. 4
I purchase lotteries because I have won prizes previously. 6
Stories about previous winners do influence in the purchase of Lotteries 5
Advertisements of lotteries or persuasion of the lottery sellers tempt me to buy lotteries. 9
Lotteries help in providing a livelihood to the poor vendors. 7
Lottery income earned by the Government is used for good causes. 8
I have faith that I would win lotteries in the future. 1
Source: Primary data

Gambler’s Fallacy 40 percent of the respondents have high fallacy,

On the basis of the Gambling Fallacy scores, the whereas 15 percent of the respondents show critical
respondents were classified into 4 categories, Gambling Fallacy.45 percent of the respondents
namely Least Fallacious, Moderately Fallacious, have moderate level of Gambling Fallacy.
Highly Fallacious and Critically Fallacious. About

60
50
40
30
20
10
0
Least Moderate High Severe

Figure (ii): Degree of Gambler's Fallacy.

Table 3: Gambling Addiction

Gambling Addiction – Statements Mean SD
My involvement in lotteries caused significant financial concerns to me or someone close to me or caused me 1.53 .943
either to borrow a significant amount of money or sell some of my possessions.
My involvement in lotteries caused significant mental stress in the form of guilt, anxiety, or depression for me 1.72 1.070
or someone close to me in the past.
My involvement in lotteries caused significant health issues for me or someone close to me in the past. 1.36 .797
My involvement in lotteries caused serious problems in my relationship with my spouse or important friends 1.53 .859
or family in the past.
My involvement in lotteries caused me to miss a significant amount of time off work in the past. 1.49 .879
In the past, I have gone back to try and win back the money I lost in lotteries. 1.88 1.112
In the past, when I was not playing lotteries, I experienced irritability, restlessness or strong cravings for it. 1.76 1.069
In the past, I have often purchased more lotteries with more money or more frequently than I intended to. 2.18 1.058
In the past, I have spent a significant portion of my income, savings or wealth for purchase of lotteries. 2.13 1.164
In the past, when I was not winning lotteries, there were significant issues in the form of guilt, anxiety, or 2.44 1.151
depression for me.
In the past, when I was not winning lotteries, there were significant health issues, insomnia or pressure etc. for me. 2.02 1.123
In the past, the thoughts of purchasing of or winning lotteries had taken a significant portion of the time 2.57 1.308
available to me.
Overall Gambling Addiction 1.8819 .65149
Source: Primary data.
Bibin K. Bhanu 5

Table 4: Gambling Addiction on the basis of Income level of the Respondents.

Sum of Squares df Mean Square F Sig.
Between Groups 4.835 5 1.209 .043 .002
Within Groups 45.673 115 .397
Total 50.508 120
Source: Primary data. Level of significance 5%.

On the basis of evaluation of Gambling the basis of income level of the respondents.
Addiction among the respondents it was found that Problem Gamblers comes from lower income
Gambling Addiction differs across respondents on groups.

Table 5: Gambling Addiction on the basis of Level of Education

Sum of Squares Df Mean Square F Sig.
Between Groups 38.448 5 9.612 2.083 .038
Within Groups 530.752 115 4.615
Total 569.200 120
Source: Primary data. Level of significance 5%.

On the basis of the evaluation of the primary lower levels tends to be more prone towards
data it was found that gambling addiction differs gambling addiction whereas respondents with
across various respondents on the basis of the level higher levels of education tends to be less and less
of education of the respondents. Respondents with prone to Gambling Addiction.

Table 6: Inter-relationship between Gambler’s Fallacy and Gambling Addiction.

Correlations
Gambling Fallacy Gambling Addiction
Pearson Correlation 1 .364
Gambling Fallacy Sig. (2-tailed) .000
N 120 120
Pearson Correlation .364 1
Gambling Addiction Sig. (2-tailed) .000
N 120 120
Source: Primary data. Level of significance 5%.

It is found that Gambler‟s Fallacy and Gambling Addiction. A person with higher gambler‟s fallacy
Addiction are correlated. Respondents with higher tends to be spending more and more on lotteries.
level of Gambler‟s Fallacy have more Gambling

Table 7: Inter-relationship between Financial Discipline and Gambling Addiction.

Correlations
Financial Discipline Gambling Fallacy
Pearson Correlation 1 -.329
Sig. (2-tailed) .755
Financial Discipline N 120 120
Pearson Correlation -.329 1
Sig. (2-tailed) .755
Gambling Addiction N 120 120
Source: Primary data. Level of significance 5%.

On the basis of analysis of primary data, it was As financial discipline increases gambling addiction
found that Financial Discipline and Gambling tends to decrease and vice-versa.
Addiction among respondents are correlated. There
is a positive correlation between both these aspects.
6 Financial Discipline, Gambler’s Fallacy and Gambling Addiction among Lottery Participants
VIII. Conclusion
In this study, an in-depth analysis of the gambling
fallacy, gambling addiction and its impact on the
overall financial discipline of lottery participants in
the district of Alappuzha is made.
Problem Gambling is an issue which over the years
remain a grey area despite having sufficient research
potential. Based on the analysis of primary data, it was
found that financial discipline differs across the
respondents based on gender. It was found that female
respondents are found to be more financially
disciplined and organized when compared to their
male counterparts. Education plays a significant role in
the financial discipline of the respondents, as the level
of education improves the respondents are becoming
more and more disciplined financially. Majority of the
respondents' purchase lottery tickets with the hope that
winning the prize would reduce their financial woes.
Based on the evaluation of primary data it was found
that gambler‟s fallacy differs across respondents based
on gender. Male respondents are found to be more
fallacious than female respondents.
Gambling addiction differs across various
respondents based on the level of education of the
respondents. Respondents with lower levels tend to
be more prone to gambling addiction whereas
respondents with higher levels of education tend to
be less and less prone to Gambling Addiction.
Respondents with a higher level of Gambler‟s Fallacy
have more Gambling Addiction. A person with higher
gambler‟s fallacy tends to be spending more and more
on lotteries. Gambling Addiction and Financial
Discipline are correlated with each other. As the level
of gambling addiction increases the level of financial
discipline comes down and vice-versa.
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