Words or Numbers? How Framing Uncertainties Affects Risk Assessment and Decision-Making

Robin Bodenberger and Kirsten Thommes

Papers from arXiv.org

Abstract: Senders of messages prefer to communicate uncertainty verbally (e.g., something is likely to happen) rather than numerically (such as 75%), leaving receivers with imprecise information. While it is well established that receivers translate verbal probabilities into numerical values that systematically deviate from the intended numerical meaning, it is less clear how this discrepancy influences subsequent behavioral actions. Thus, the role of verbal versus numerical communication of uncertainty warrants additional attention, to investigate two critical questions: 1) whether differences in decision-making under uncertainty arise between these communication forms, and 2) whether such differences persist even when verbal phrases are translated accurately into the intended numerical meaning. By implementing a laboratory experiment, we show that individuals place significantly lower values on uncertain options with medium to high likelihoods when uncertainty is communicated verbally rather than numerically. This effect may lead to less rational decisions under verbal communication, particularly at high likelihoods. Those results remain consistent even if individuals translate verbal uncertainty correctly into the intended numerical uncertainty, implying that a biased behavioral response is not only induced by miscommunication. Instead, ambiguity about the exact meaning of a verbal phrase interferes with decision-making even beyond potential mistranslations. These findings tie in with previous research on ambiguity aversion, which has predominantly operationalized ambiguity through numerical ranges rather than verbal phrases. Based on our findings we conclude that managers should communicate uncertainty numerically, as verbal communication can unintentionally influence the decision-making process of employees.

Date: 2025-02, Revised 2025-12
New Economics Papers: this item is included in nep-cbe and nep-exp
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