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Statistical formats to optimize evidence-based decision making: a behavioral approach

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Author Info

  • Iván Arribas

    ()
    (ERI-CES, University of Valencia, Ivie)

  • Irene Comeig

    ()
    (LINEEX, University of Valencia)

  • Amparo Urbano Salvador

    ()
    (ERI-CES, University of Valencia)

  • Jose E. Vila

    ()
    (ERI-CES, University of Valencia)

Abstract

Statistical information is crucial for managerial decision making. The decision-making literature in psychology and mathematical cognition documents how different statistical formats can facilitate certain types of decisions. The present analysis is the first of its kind to assess the impact of statistical formats in the presentation of data from market research on both the optimality of market decisions and the time required to perform the decision-making process. An economic experiment provides the data for this study. The experiment presents statistical information in simple frequencies and relative frequencies using numerical and pictorial representations in the context of different informational environments. The key findings are that statistical information presented in terms of relative frequency formats gives rise to more accurate decision making than data presented in terms of simple frequencies, independently of the informational environments. When time is the relevant variable, numerical formats lead to a faster interpretation than pictorial ones. Since the number of factors defining the four statistical formats and the different informational environments is quite large, an orthogonal design offers a suitable experimental design. This design keeps the experiment manageable without substantially reducing its analytical power

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File URL: http://www.uv.es/erices/RePEc/WP/2013/0513.pdf
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Bibliographic Info

Paper provided by University of Valencia, ERI-CES in its series Discussion Papers in Economic Behaviour with number 0513.

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Date of creation: Oct 2013
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Handle: RePEc:dbe:wpaper:0513

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Keywords: Economic experiments; Statistical formats; Probability judgment; Orthogonal design; Judgment under uncertainty;

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  1. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
  2. Robin Hogarth & Emre Soyer, 2010. "Econometrics and decision making: Effects of presentation mode," Economics Working Papers 1204, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Macchi, Laura, 2000. "Partitive Formulation of Information in Probabilistic Problems: Beyond Heuristics and Frequency Format Explanations," Organizational Behavior and Human Decision Processes, Elsevier, vol. 82(2), pages 217-236, July.
  4. Robin Hogarth & Emre Soyer, 2010. "Econometrics and Decision Making: Effects of Presentation Mode," Working Papers 426, Barcelona Graduate School of Economics.
  5. Christine Kaufmann & Martin Weber & Emily Haisley, 2013. "The Role of Experience Sampling and Graphical Displays on One's Investment Risk Appetite," Management Science, INFORMS, vol. 59(2), pages 323-340, July.
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