The Effectiveness of Simple Decision Heuristics: Forecasting Commercial Success for Early-Stage Ventures

Thomas Astebro and Samir Elhedhli ()
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Samir Elhedhli: Department of Management Sciences, University of Waterloo, Waterloo, Ontario N2L 3G1, Canada

Management Science, 2006, vol. 52, issue 3, 395-409

Abstract: We investigate the decision heuristics used by experts to forecast that early-stage ventures are subsequently commercialized. Experts evaluate 37 project characteristics and subjectively combine data on all cues by examining both critical flaws and positive factors to arrive at a forecast. A conjunctive model is used to describe their process, which sums "good" and "bad" cue counts separately. This model achieves a 91.8% forecasting accuracy of the experts' correct forecasts. The model correctly predicts 86.0% of outcomes in out-of-sample, out-of-time tests. Results indicate that reasonably simple decision heuristics can perform well in a natural and very difficult decision-making context.

Keywords: judgment; heuristic; forecast; decision making; statistical prediction; early-stage ventures (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (37)

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http://dx.doi.org/10.1287/mnsc.1050.0468 (application/pdf)

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Working Paper: The effectiveness of simple decision heuristics: Forecasting commercial success for early-stage ventures (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:52:y:2006:i:3:p:395-409

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