The Effectiveness of Simple Decision Heuristics: Forecasting Commercial Success for Early-Stage Ventures
AbstractWe 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.
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Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 52 (2006)
Issue (Month): 3 (March)
judgment; heuristic; forecast; decision making; statistical prediction; early-stage ventures;
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