Contrast effects in judgmental forecasting when assessing the implications of worst- and best-case scenarios

Goodwin, Paul, Gonul, Sinan, Önkal, Dilek, Kocabiyikoglu, Ayse and Göğüş, Celile (2019) Contrast effects in judgmental forecasting when assessing the implications of worst- and best-case scenarios. Journal of Behavioral Decision Making, 32 (5). pp. 536-549. ISSN 0894-3257

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Two experiments investigated whether individuals’ forecasts of the demand for products and a stock market index assuming a best or worst-case scenario depend on whether they have seen a single scenario in isolation or whether they have also seen a second scenario presenting an opposing view of the future. Normatively, scenarios should be regarded as belonging to different plausible future worlds so that the judged implications of one scenario should not be affected when other scenarios are available. However, the results provided evidence of contrast effects in that the presentation of a second ‘opposite’ scenario led to more extreme forecasts consistent with the polarity of the original scenario. In addition, people were more confident about their forecasts based on a given scenario when two opposing scenarios were available. We examine the implications of our findings for the elicitation of point forecasts and judgmental prediction intervals and the biases that are often associated with them.

Item Type: Article
Uncontrolled Keywords: best and worst case scenarios, context effects, contrast effects, demand forecasting, prediction intervals, stock market forecasting
Subjects: N200 Management studies
Department: Faculties > Business and Law > Newcastle Business School
Depositing User: Becky Skoyles
Date Deposited: 26 Mar 2019 16:01
Last Modified: 09 Jan 2020 15:00

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