What drives decision makers to follow or ignore forecasting tools − A game based analysis

Abstract

Using forecasts is a prerequisite for good decision making but often decision makers ignore the outcomes of forecasting tools and rely solely on their personal assessment of the decision situation. On the one hand, this usually leads to worse decisions in comparison to situations where the forecast was considered. On the other hand, forecasts can also be defective. If so, decision makers are well advised not to use the forecast. Thus, it is crucial that they do not rely blindly on forecasts but scrutinize critically the results. The question is under which circumstances decision makers follow or ignore forecasts. To answer this question, we conducted a laboratory experiment where decision makers have the choice between two alternatives. The forecast provided gives an advice which alternative to choose. The forecast is manipulated so that it is only partly reliable. Results show that participants do not act optimally. If they are blinded by their success or experience several failures over time that they are not responsible for, they tend to rely on the manipulated forecast instead of calculating their own more accurate forecast.