Behavioral Economics: Why it is so Hard to Take a Hit on a 16
When you are at the table and the dealer shows a 7 and you have a 16 it is very hard emotionally to take the hit. Why? Probably because you are likely to lose no matter what but, if you take the hit, you have a sense of taking an active role in participating in your loss. If you do not take the hit, then you feel more passive. After all, you might think, I did not cause the loss.
Rationally you know that you should take the hit but what behavioral economics tells us is that people feel a greater sense of regret when they take an active step that turns out to be a mistake than when doing nothing turns out to be a mistake. An example, is that someone feels worse if he or she buys a stock that goes down in value than if she or she declines to buy a stock that appreciates in value.
Casinos make a great deal of money on the irrationality of not taking the hit.