Article ID: | iaor1990440 |
Country: | United States |
Volume: | 8 |
Issue: | 1 |
Start Page Number: | 1 |
End Page Number: | 7 |
Publication Date: | Dec 1989 |
Journal: | Marketing Science |
Authors: | Glazier Rashi, Steckel J.H., Winer R.S. |
The expectation formation process has been extensively studied by economists, particularly for macroeconomic variables. However, no prior research has examined how expectations are formed and used in the context of marketing forecasting. In this paper, the authors use data from a simulated competitive environment (1) to examine the expectation formation process for important marketing variables such as market size, number of competing products, and average industry price, and (2) determine how inter-firm variation in the formation process affects performance. Using the Rational Expectations Hypothesis as a framework, they find that decision-makers’ forecasts tend to be efficient, i.e., utilize all relevant available information, but are biased. Other key findings suggest that degree of firm rationality in the forecasting process as well as the level of forecasting accuracy are positively related to performance.