Structured analogies for forecasting
When people forecast, they often use analogies but in an unstructured manner. We propose a structured judgmental procedure that involves asking experts to list as many analogies as they can, rate how similar the analogies are to the target situation, and match the outcomes of the analogies with possible outcomes of the target. An administrator would then derive a forecast from the experts' information. We compared structured analogies with unaided judgments for predicting the decisions made in eight conflict situations. These were difficult forecasting problems; the 32% accuracy of the unaided experts was only slightly better than chance. In contrast, 46% of structured analogies forecasts were accurate. Among experts who were independently able to think of two or more analogies and who had direct experience with their closest analogy, 60% of forecasts were accurate. Collaboration did not improve accuracy.
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- Kesten C. Green & J. Scott Armstrong, 2004. "Value of Expertise For Forecasting Decisions in Conflicts," Monash Econometrics and Business Statistics Working Papers 27/04, Monash University, Department of Econometrics and Business Statistics.
- Armstrong, J. Scott, 2006. "Findings from evidence-based forecasting: Methods for reducing forecast error," International Journal of Forecasting, Elsevier, vol. 22(3), pages 583-598.
- Green, Kesten C., 2002. "Forecasting decisions in conflict situations: a comparison of game theory, role-playing, and unaided judgement," International Journal of Forecasting, Elsevier, vol. 18(3), pages 321-344.
- Daniel Kahneman & Dan Lovallo, 1993. "Timid Choices and Bold Forecasts: A Cognitive Perspective on Risk Taking," Management Science, INFORMS, vol. 39(1), pages 17-31, January.
- Robert Goldfarb & H. O. Stekler & Joel David, 2005. "Methodological issues in forecasting: Insights from the egregious business forecast errors of late 1930," Journal of Economic Methodology, Taylor & Francis Journals, vol. 12(4), pages 517-542.
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