Verbal Probability Phrases & Decision Making under Risk

Last registered on August 07, 2024
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Pre-Trial

Trial Information

General Information

Title
Verbal Probability Phrases & Decision Making under Risk
RCT ID
AEARCTR-0014095
Initial registration date
July 31, 2024

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
August 06, 2024, 1:27 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated
August 07, 2024, 3:25 AM EDT

Last updated is the most recent time when changes to the trial's registration were published.

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Primary Investigator

Name
Robin Bodenberger
Affiliation
Paderborn University
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Other Primary Investigator(s)

Additional Trial Information

Status
In development
Start date
2024-07-31
End date
2025-06-30
Keywords
Behavior, Firms & Productivity
Additional Keywords
Decision-making, risk
JEL code(s)
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
In the field of decision-making under risk most theories and models assume that risk is communicated through precise numerical probabilities. This is an unrealistic assumption as individuals prefer to use verbal probability phrases (e.g. likely) when conveying risks. Previous research on verbal probability phrases typically focuses on how individuals translate such phrases into numerical values. The direct impact of verbal probabilities on risk preferences and subsequent decision-making is mostly unexplored. Within our experiment we analyze how the translation of verbal probability phrases lines up with subsequent decision-making. Additionally, we distinguish whether risk is communicated numerically or verbally and focus on how the two forms of communication may differently impact the risk preference and subsequent decision-making.
External Link(s)

Registration Citation

Citation
Bodenberger, Robin. 2024. "Verbal Probability Phrases & Decision Making under Risk." AEA RCT Registry. August 07. https://doi.org/10.1257/rct.14095-2.0
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Experimental Details

Interventions

Intervention(s)
Each participant is randomly assigned to one of two possible treatments and tasked to complete 5 decisions under risk.
Intervention Start Date
2024-08-07
Intervention End Date
2024-08-28

Primary Outcomes

Primary Outcomes (end points)
Risk Preference
Primary Outcomes (explanation)
The reservation price for selling a lottery ticket with an uncertain outcome is compared to the expected value of the outcome. A reservation price below the expected value implies risk aversion whereas a higher reservation price implies risk seeking behavior.

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
As part of the survey, participants are presented with ten lottery tickets, of which they must select one. The outcome of the selected ticket can either be a 'Win' or a 'Loss'. This process is repeated for a total of five rounds. The probability of winning varies in all rounds and is always communicated. The form of communication depends on an assigned treatment. The treatment group receives verbal probabilities, while the control group receives the associated numerical probability.

This section includes an additional monetary incentive. One of the five rounds is randomly selected for a bonus payment. The bonus payment is initially determined by the outcome of the selected lottery ticket - £2.00 for a 'Win' or £0.00 for a 'Loss'. In addition, participants will receive an offer for the selected ticket ranging between 0 and 200 pence. The offer will be randomly generated based on an equal distribution between 0 and 200. The amount of the offer is not initially communicated to the participants. Instead, participants are asked to state the lowest price for which they would be prepared to sell the selected ticket (reservation price). If the offer is higher than the reservation price, the ticket is sold and the participants receive an amount of money equal to the offer. Otherwise, the outcome of the lottery ticket determines the bonus payment, with participants receiving £2.00 for a 'Win' or no additional bonus payment for a 'Loss'. Based on this design, the reservation price provides information about the risk preference, with a lower reservation price implying more risk aversion.
Experimental Design Details
Not available
Randomization Method
Participants are randomly assigned to one of two treatments.
Additionally, the order of the decisions are randomized.
Randomization Unit
Individual
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
200 individuals
Sample size: planned number of observations
200 individuals
Sample size (or number of clusters) by treatment arms
We expect more variety within the verbal treatment and want to accomodate for that.
~150 in the verbal treatment
~50 in the numerical treatment
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
IRB Approval Date
IRB Approval Number
Analysis Plan