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Experiencing Simulated Outcomes

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  • Robin Hogarth
  • Emre Soyer

Abstract

Whereas much literature has documented difficulties in making probabilistic inferences, it has also emphasized the importance of task characteristics in determining judgmental accuracy. Noting that people exhibit remarkable efficiency in encoding frequency information sequentially, we construct tasks that exploit this ability by requiring people to experience the outcomes of sequentially simulated data. We report two experiments. The first involved seven well-known probabilistic inference tasks. Participants differed in statistical sophistication and answered with and without experience obtained through sequentially simulated outcomes in a design that permitted both between- and within-subject analyses. The second experiment involved interpreting the outcomes of a regression analysis when making inferences for investment decisions. In both experiments, even the statistically naïve make accurate probabilistic inferences after experiencing sequentially simulated outcomes and many prefer this presentation format. We conclude by discussing theoretical and practical implications.

Suggested Citation

  • Robin Hogarth & Emre Soyer, 2010. "Experiencing Simulated Outcomes," Working Papers 470, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:470
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    References listed on IDEAS

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    1. Simon, Herbert A, 1978. "Rationality as Process and as Product of Thought," American Economic Review, American Economic Association, vol. 68(2), pages 1-16, May.
    2. Robin Hogarth & Emre Soyer, 2010. "Econometrics and decision making: Effects of presentation mode," Economics Working Papers 1204, Department of Economics and Business, Universitat Pompeu Fabra.
    3. Robin Hogarth & Emre Soyer, 2010. "Experiencing simulated outcomes," Economics Working Papers 1224, Department of Economics and Business, Universitat Pompeu Fabra.
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    Cited by:

    1. Lejarraga, Tomás & Gonzalez, Cleotilde, 2011. "Effects of feedback and complexity on repeated decisions from description," Organizational Behavior and Human Decision Processes, Elsevier, vol. 116(2), pages 286-295.
    2. Robin Hogarth & Emre Soyer, 2010. "Experiencing simulated outcomes," Economics Working Papers 1224, Department of Economics and Business, Universitat Pompeu Fabra.

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    More about this item

    Keywords

    Probabilistic reasoning; natural frequencies; experiential sampling; simulation;
    All these keywords.

    JEL classification:

    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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