A gambler usually wagers more after taking a loss, in the misguided belief that a run of bad luck increases the probability of a win. We tend to cling to the misconception that past events can skew future odds. "On some level, you're thinking, 'If I just lost, it's going to even out.' The extent to which you're disturbed by a loss seems to go along with risky behavior," says University of Michigan psychologist William Gehring, Ph.D., co-author of a study linking dicey decision-making to neurological activity originating in the medial frontal cortex, long thought to be an area of the brain used in error detection.
Because people are so driven to up the ante after a loss, Gehring believes that the medial frontal cortex unconsciously influences future decisions based on the impact of the loss, in addition to registering the loss itself.
Gehring drew this conclusion by asking 12 subjects fitted with electrode caps to choose either the number 5 or 25, with the larger number representing the riskier bet. On any given round, both numbers could amount to a loss, both could amount to a gain or the results could split, one number signifying a loss, the other a gain.