Failures in the communication of risk: Decisions and numeracy
Gary E. Bolton, Elena Katok, Tobias Stangl
Production and Operations Management · 2022 · Volume 31 · Issue 12
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.
Keywords
decisions, numeracy, risk forecast, trust
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