Predicting the next big thing : success as a signal of poor judgment
Denrell, Jerker and Fang, C.. (2010) Predicting the next big thing : success as a signal of poor judgment. Management Science, Vol.56 (No.10). pp. 1653-1667. ISSN 0025-1909Full text not available from this repository.
Official URL: http://dx.doi.org/10.1287/mnsc.1100.1220
Successfully predicting that something will become a big hit seems impressive. Managers and entrepreneurs who have made successful predictions and have invested money on this basis are promoted, become rich, and may end up on the cover of business magazines. In this paper, we show that an accurate prediction about such an extreme event, e.g., a big hit, may in fact be an indication of poor rather than good forecasting ability. We first demonstrate how this conclusion can be derived from a formal model of forecasting. We then illustrate that the basic result is consistent with data from two lab experiments as well as field data on professional forecasts from the Wall Street Journal Survey of Economic Forecasts.
|Item Type:||Journal Article|
|Divisions:||Faculty of Social Sciences > Warwick Business School > Behavioural Science
Faculty of Social Sciences > Warwick Business School
|Journal or Publication Title:||Management Science|
|Publisher:||Institute for Operations Research and the Management Sciences (I N F O R M S)|
|Page Range:||pp. 1653-1667|
|Access rights to Published version:||Restricted or Subscription Access|
Actions (login required)