Demand Forecasting Behavior: System Neglect and Change Detection

Mirko Kremer (), Brent Moritz () and Enno Siemsen ()
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Mirko Kremer: Smeal College of Business, Pennsylvania State University, University Park, Pennsylvania 16802
Brent Moritz: Smeal College of Business, Pennsylvania State University, University Park, Pennsylvania 16802
Enno Siemsen: Carlson School of Management, University of Minnesota, Minneapolis, Minnesota 55455

Management Science, 2011, vol. 57, issue 10, 1827-1843

Abstract: We analyze how individuals make forecasts based on time-series data. Using a controlled laboratory experiment, we find that forecasting behavior systematically deviates from normative predictions: Forecasters overreact to forecast errors in relatively stable environments, but underreact to errors in relatively unstable environments. The performance loss that is due to such systematic judgment biases is larger in stable than in unstable environments. This paper was accepted by Martin Lariviere, operations management.

Keywords: forecasting; behavioral operations; system neglect; exponential smoothing (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (45)

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