Evaluating plant managers’ production plans over business cycles: asymmetric loss and rationality

Yoichi Tsuchiya

SN Business & Economics, 2022, vol. 2, issue 8, 1-29

Abstract: Abstract This study examines monthly production plans, formed by plant managers, to investigate their asymmetric loss functions and rationality using a multivariate framework from 1998 to 2019. Since managers continuously revise their forecasts, the evaluation of the forecasts needs to consider the magnitude of the forecast revision from the previous forecast, and the forecast error between the revised forecast and realized values. Firms incur costs on the revision of the production plan, which requires redistribution of inputs and allocation of capital equipment. Firms also incur costs of storage of stocks or loss of sales opportunity because of updated monthly production plans. In comparison to the univariate asymmetric loss framework, our framework provides more reasonable estimates for asymmetry and better evidence of forecast rationality. The firms’ production plan is broadly likely to be over-predicted. In addition, they are likely to be revised downward in recessions, though no such, or less, asymmetry is found during expansions.

Keywords: Asymmetric loss; Business cycle; Rationality; Stock-out motive (search for similar items in EconPapers)
JEL-codes: D22 E23 E32 E37 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s43546-022-00279-2 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:snbeco:v:2:y:2022:i:8:d:10.1007_s43546-022-00279-2

Ordering information: This journal article can be ordered from
https://www.springer.com/journal/43546

DOI: 10.1007/s43546-022-00279-2

Access Statistics for this article

SN Business & Economics is currently edited by Gino D'Oca

More articles in SN Business & Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().