Hot hands and equilibrium

Abstract

Past literature suggests that success rates in professional basketball are independent of past performance and this has been interpreted as evidence that the commonly shared belief in Hot Hands (HH) is a cognitive illusion. This is often cited as evidence of biased decision making, even when financial stakes are high. We argue that this interpretation ignores changes in both teams' behaviour after the detection of an HH player. We derive testable hypotheses that differentiate between HH as a real phenomenon and a cognitive illusion. Analysing an entire NBA season, our results are consistent with HH being a real phenomenon. © 2011 Taylor and Francis Group, LLC.