Probably Possible

An interesting short piece in VoxEU on public perceptions of the chances that a low probability event with serious consequences will occur - in the wake of one having actually taken place. Think predictions of tsunamis following a tsunami, stock market crashes following a stock market crash... or lottery ticket number combinations.

...an extreme example from the Bulgarian 6/42 state lottery illustrates the point. In September 2009, the exact same six numbers were drawn in two consecutive weeks. While no player picked the winning numbers in the first draw, 18 players did in the second draw. These players then had to share the jackpot and lost about 94% of the prize money compared to the case with only one winner.

A possible lesson to be garnered is that ex post compensation for highly unlikely events that did in fact take place may not provide the returns imagined in the future.

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