Using Forecasting Accuracy As A Measure Of Success In Business Simulations

Abstract

This paper describes the results of an experiment that investigated the link between the ability of simulation team participants to forecast the financial and/or market related outcomes and the actual results of their decision making. This experiment was repeated six times over the course of an academic year. Each replication involved 12 consecutive decision periods. The experiment required each member of the student teams to forecast either the expected market share and sales of the product for which they were making decisions or to forecast the cash flows and profits of the simulated firm. The managerial position a student held during the simulation determined the type of forecast (market share, cash flow, etc.) he or she would be assigned. The experiment showed a very strong link between the ability of the management team to forecast outcomes and their firms performance, as measured by profitability.