Monday, August 23, 2010

The Overconfidence Problem in Forecasting

An article on Friday in the New York Times highlighted a peculiar problem we've heard about as well. A few of our clients who have studied the responses of different strata in their organization say that upper management who participate in their prediction markets have been proven to have a more optimistic forecast than what reality dictated. And those in the lower levels of the organization tended to have a more pessimistic outlook than reality dictated.

Richard Thayer from the Chicago Booth School of Business discusses the problem on a larger scale here:
NYTimes: The Overconfidence Problem in Forecasting

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