"The Effect of Foreign Competition on Forecasting Bias"
©
Review of Economics and Statistics,
February
2006
Volume: 88
|
Issue: 1
|
Pages: 61-68
Publication type: Journal article
Research Archive Topic: Business Economics and Public Policy, Capital Markets and Investments, Corporate Finance, Operations, World Business
Abstract
This paper studies the effect of foreign competition on the extent of forecasting bias. I focus on two biases often described in the behavioral economics literature: overoptimism and excessive belief in trends. Using data from firm-level surveys in five African countries, I show that firms that do not face foreign competition generate forecasts of sales growth that have greater trend and optimism biases than firms that have foreign competitors. I further provide evidence that these erroneous forecasts have real effects on firms? inventory management.
Each author name for a Columbia Business School faculty member is linked to a faculty research page, which lists additional publications by that faculty member.
Each topic is linked to an index of publications on that topic.