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Failures in the communication of risk: Decisions and numeracy

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  • Gary E. Bolton
  • Elena Katok
  • Tobias Stangl

Abstract

Forecast uncertainty, typically measured quantitatively, raises questions of how best to communicate the forecast to a public with diverse numeracy skills. Here, we report an experiment examining how the numeracy of decision makers relates to the efficacy of forecast information provided in two alternative mechanisms to decision makers facing a loss event. The uncertainty mechanism states the probability of the loss event. The recommendation mechanism directly advises on which decision to take. We find that probabilities are better at inducing preventative action than are recommendations, even among those who score low on numeracy. Those who score high on numeracy use probabilities somewhat more effectively than do those who score low. But recommendations exhibit a greater trust problem that is most pronounced among those who score low on numeracy.

Suggested Citation

  • Gary E. Bolton & Elena Katok & Tobias Stangl, 2022. "Failures in the communication of risk: Decisions and numeracy," Production and Operations Management, Production and Operations Management Society, vol. 31(12), pages 4616-4627, December.
    • Handle: RePEc:bla:popmgt:v:31:y:2022:i:12:p:4616-4627
    DOI: 10.1111/poms.13858
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    References listed on IDEAS

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    1. Andrea D. Gurmankin & Jonathan Baron & Katrina Armstrong, 2004. "The Effect of Numerical Statements of Risk on Trust and Comfort with Hypothetical Physician Risk Communication," Medical Decision Making, , vol. 24(3), pages 265-271, June.
    2. Craig R. Fox & Amos Tversky, 1998. "A Belief-Based Account of Decision Under Uncertainty," Management Science, INFORMS, vol. 44(7), pages 879-895, July.
    3. repec:cup:judgdm:v:7:y:2012:i:1:p:25-47 is not listed on IDEAS
    4. Gary E. Bolton & Elena Katok, 2018. "Cry Wolf or Equivocate? Credible Forecast Guidance in a Cost-Loss Game," Management Science, INFORMS, vol. 64(3), pages 1440-1457, March.
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    1. Subodha Kumar & Christopher S. Tang, 2022. "Expanding the boundaries of the discipline: The 30th‐anniversary issue of Production and Operations Management," Production and Operations Management, Production and Operations Management Society, vol. 31(12), pages 4257-4261, December.

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