Paper #1204

Title:

Econometrics and decision making: Effects of presentation mode

Authors:

Robin Hogarth and Emre Soyer

Date:

February 2010

Abstract:

Much of empirical economics involves regression analysis. However, does the presentation of results affect economists’ ability to make inferences for decision making purposes? In a survey, 257 academic economists were asked to make probabilistic inferences on the basis of the outputs of a regression analysis presented in a standard format. Questions concerned the distribution of the dependent variable conditional on known values of the independent variable. However, many respondents underestimated uncertainty by failing to take into account the standard deviation of the estimated residuals. The addition of graphs did not substantially improve inferences. On the other hand, when only graphs were provided (i.e., with no statistics), respondents were substantially more accurate. We discuss implications for improving practice in reporting results of regression analyses.

Keywords:

Regression analysis; presentation formats; probabilistic predictions; graphs., leex

JEL codes:

C01; C20; C53; Y10

Area of Research:

Behavioral and Experimental Economics

Download the paper in PDF format