Dyadic decisions with numerical and verbal probabilities

Abstract

The goal of the research was to compare decisions under risk in a situation in which forecasters (F) communicate to decision makers (DM) either numerically (e.g., .70) or verbally (e.g., likely) about the chances that a binary event will occur. Following each forecast, the DM bid for a winning or losing lottery based on the event. In Experiment 1 Fs and DMs also provided numerical translations of each verbal forecast after the DMs' bid. In Experiment 2 the DMs provided membership functions over the [0, 1] interval for each phrase used by the Fs. The primary results were: (a) extreme similarity in the DM's bids and rates of bidding under the two modes of communication; (b) greater variability in bids to specific verbal than numerical forecasts; (c) a pattern of bids, in which DMs demonstrated risk seeking for gains and risk neutrality for losses; (d) DMs' numerical translations in Experiment 1 were closer to .50 than were those of Fs; and (e) phrases selected by Fs had high membership values to DMs for the probabilities the Fs were attempting to describe. Points (a), (b), (d), and (e) are consistent with the ν-μ model which assumes that the vague meaning of a probability phrase can be represented by a membership function over the [0, 1] interval, and that in reaching a decision the DM focuses on a range of probabilities with sufficiently high membership. Point (c) is speculatively attributed to social aspects of the dyadic situation, and requires further investigation.