The effectiveness of simple decision heuristics: Forecasting commercial success for early-stage ventures

Thomas Astebro and Samir Elhedhli

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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: Heuristic method; Probabilistic approach; Statistical analysis; Judgment; Decision support system; Decision making; Forecasting (search for similar items in EconPapers)
Date: 2006-01-01
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Citations: View citations in EconPapers (34)

Published in Management Science, 2006, 52 (3), pp.395-409. ⟨10.1287/mnsc.1050.0468⟩

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Journal Article: 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:hal:journl:hal-00476866

DOI: 10.1287/mnsc.1050.0468

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