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Notes on Judgemental

Notes on Judgemental

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Decision making - International business
Decision making - International business

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Categories:Types, Business/Law
Published by: Rohan Rajkumar Chavan on Jan 18, 2013
Copyright:Attribution Non-commercial

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01/18/2013

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II Subjective Information and Expectations
Judgmental Forecasting is the most common method of actualforecasting, especially when:-- the decision to be undertaken is critical-- is the exact data required is unavailable or unreliable-- if the forecaster views himself as an expert in the area-- may be based on theory and/or actual analysis of data, but, no formaldecision rule exists to lead to ultimate forecast-- sometimes argued that subjective analysis is useful in times of structural change as statistical methods are too slow to pick up thechange.-- this view is challenged by O'Connor, Remus and Griggs [I.J. of F.,1993] as subjective analysis puts too much weight on randomfluctuations1. Multiple ScenariosUse of multiple scenarios beneficial in long-term planning (See Godet [J.of F., 1982] and Bauers and Weber [J. of F., 1988]-- key is to attempt to identify all possible outcomes-- put subjective probabilities on all outcomes-- leads to use of Bayes Theorem to update or re-evaluate predictions-- particularly useful in new product introduction scenarios
 
a) use of theorymany forecasters believe that theory is essentialothers believe that there is only one important criterion--RESULTS!!i.e., who cares why a method works as long as it does-- problem here is that just because a method has worked well in the pastdoes not mean it will continue to work in the futureexample:Over a five year period we observe that students wearing blue clothes toECON603 exams get A's and those wearing red clothes get D's.Would you use this model to predict the grades from this year's class? No! if believe result is from random chanceYes! if we believe there is a reason but we just do not know iti.e., it is my model and it biases my grading

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