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Demand Forecasting Behavior: System Neglect and Change Detection

Author

Listed:
  • Mirko Kremer

    (Smeal College of Business, Pennsylvania State University, University Park, Pennsylvania 16802)

  • Brent Moritz

    (Smeal College of Business, Pennsylvania State University, University Park, Pennsylvania 16802)

  • Enno Siemsen

    (Carlson School of Management, University of Minnesota, Minneapolis, Minnesota 55455)

Abstract

We analyze how individuals make forecasts based on time-series data. Using a controlled laboratory experiment, we find that forecasting behavior systematically deviates from normative predictions: Forecasters overreact to forecast errors in relatively stable environments, but underreact to errors in relatively unstable environments. The performance loss that is due to such systematic judgment biases is larger in stable than in unstable environments. This paper was accepted by Martin Lariviere, operations management.

Suggested Citation

  • Mirko Kremer & Brent Moritz & Enno Siemsen, 2011. "Demand Forecasting Behavior: System Neglect and Change Detection," Management Science, INFORMS, vol. 57(10), pages 1827-1843, October.
    • Handle: RePEc:inm:ormnsc:v:57:y:2011:i:10:p:1827-1843
    DOI: 10.1287/mnsc.1110.1382
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    References listed on IDEAS

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