High Chances and Close Margins: How Different Forecast Formats Shape Beliefs
- Oleg Urminsky, Booth School of Business, University of Chicago, Chicago, Illinois, United States
- Lucy Shen, Chinese University of Hong Kong, Hong Kong, Hong Kong
- Sondre Skarsten, Booth School of Business, University of Chicago, Chicago, Illinois, United States
AbstractWhile a large literature has studied how people make forecasts, less is known about how lay people process and interpret forecasts presented to them. We contrast two common ways of communicating an uncertain forecast, as either a chance (e.g., the probability of winning) or as an expected margin (e.g., the point spread). Across five studies, we find a robust chance-margin discrepancy: people tend to treat a chance forecast as conveying greater probability of the higher-likelihood outcome than the statistically equivalent margin forecast.