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Judgment Based Marketing Decision Models: An Experimental Investigation of the Decision Calculus Approach

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  • Dipankar Chakravarti

    (University of Florida)

  • Andrew Mitchell

    (Carnegie-Mellon University)

  • Richard Staelin

    (Carnegie-Mellon University)

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    Abstract

    Managerial judgment is frequently required to estimate many of the parameters of decision calculus models and the quality of these judgmental inputs may substantially affect model-based decisions. This paper suggests that if model builders are to rely upon managerial judgments in building models, research should be directed at understanding when managerial judgments will be valid and the types of biases that might be expected. A quasi-experimental design is used to explore managers' abilities to estimate the parameters of a decision-calculus model (ADBUDG) and to examine the value of this model in decision-making. The results are consistent with previous evidence of the existence of biases in human judgment. More specifically, they indicate that a manager's experience in a limited region of a nonlinear response function does not enable him to accurately predict decision outcomes or parameters in the unfamiliar regions and that model usage may, in certain situations, actually lead to poorer decisions.

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    File URL: http://dx.doi.org/10.1287/mnsc.25.3.251
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 25 (1979)
    Issue (Month): 3 (March)
    Pages: 251-263

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    Handle: RePEc:inm:ormnsc:v:25:y:1979:i:3:p:251-263

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    Related research

    Keywords: marketing: advertising/promotion; decision analysis; organizational studies;

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    Cited by:
    1. Parker, Philip M. & Sarvary, Miklos, 1997. "Formulating dynamic strategies using decision calculus," European Journal of Operational Research, Elsevier, vol. 98(3), pages 542-554, May.
    2. Lilien, Gary L. & Rangaswamy, Arvind & van Bruggen, Gerrit H. & Wierenga, Berend, 2002. "Bridging the marketing theory-practice gap with marketing engineering," Journal of Business Research, Elsevier, vol. 55(2), pages 111-121, February.
    3. Althuizen, N.A.P. & Wierenga, B., 2003. "The Effectiveness of Case-Based Reasoning: An Application in Sales Promotions," ERIM Report Series Research in Management ERS-2003-053-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
    4. van Bruggen, G.H. & Smidts, A. & Wierenga, B., 2000. "The Powerful Triangle of Marketing Data, Managerial Judgment, and Marketing Management Support Systems," ERIM Report Series Research in Management ERS-2000-33-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
    5. Lilien, G.L. & Rangaswamy, A. & Starke, K. & van Bruggen, G.H., 2001. "How and Why Decision Models Influence Marketing Resource Allocations," ERIM Report Series Research in Management ERS-2001-33-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
    6. Dong, Weimin & Swain, Scott D. & Berger, Paul D., 2007. "The role of channel quality in customer equity management," Journal of Business Research, Elsevier, vol. 60(12), pages 1243-1252, December.
    7. J. S. Armstrong & R. Brodie & S. McIntyre, 2005. "Forecasting Methods for Marketing:* Review of Empirical Research," General Economics and Teaching 0502023, EconWPA.

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