Forecasting Accuracy as a Performance Measure in Business Simulations

Abstract

This article describes the results of an experiment that investigated the link between the ability of business simulation team participants to forecast financial and/or market-related outcomes, and links this forecasting ability to 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 that the participant held during the simulation determined the type of forecast (market share, cash flow, etc.) he or she was assigned. The experiment showed a very strong link between the ability of the management team to forecast outcomes and their firm's performance, as measured by profitability.

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