In evaluating exploration prospects, is it better to rely on a few top experts or solicit estimates from a larger group and take the average? If the evaluators work properly, a statistical compensation should occur between optimistic and pessimis- tic estimates so that a group average should be about right. This principle provides a simple explanation for the winner’s curse because the winning bid is based on the highest estimate instead of themean. But does this principle of statistical com- pensation of errors apply in prospect evaluation? To answer this question, a data set from the movie industry is used as an analog. The data are forecasts of the number of tickets sold for new movies on the opening day in the Paris area. These forecasts are made everyweek in a competitive game between movie industry professionals, with the advantage, unlike oil industry data, that the true values become known. Several lessons can be learned from this data set that po- tentially apply to prospect evaluation. The most important is that averaging several independent appraisals of a given pros- pect generally does not give the true value of the prospect. However, over a large enough portfolio of prospects, the sta- tistical compensation does occur and the mean can be deliv- ered. The movie data indicate that a single expert can out- perform the group as a whole, but averaging the estimates of a few top experts, possibly weighted by credibility, is even better. The data also show that the distribution of the fore- casts accurately represents the uncertainty about the true val- ue. Finally, the influence of cognitive biases on estimating is briefly discussed, in particular anchoring and the need to chal- lenge systematically the validity of geological analogs.
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