Seminar The Coherence Side of Rationality Theory and evidence from firm plans Departmental Seminar Add to calendar 2024-10-11 11:00 2024-10-11 12:15 Europe/Rome The Coherence Side of Rationality Theory and evidence from firm plans Seminar Room 3rd Floor Villa La Fonte YYYY-MM-DD Print Share: Share on Facebook Share on BlueSky Share on X Share on LinkedIn Send by email Scheduled dates Oct 11 2024 11:00 - 12:15 CEST Seminar Room 3rd Floor, Villa La Fonte Organised by Department of Economics In this seminar, Pamela Giustinelli (Bocconi University) will present the paper 'The Coherence Side of Rationality Theory and evidence from firm plans'. Abstract:We study the forecasting heuristics MBA textbooks propose to make firms' plans. Using Duke Survey data, we document the prevalence and heterogeneity of heuristics use among top US executives. We propose a theory of optimal multidimensional forecasting; evaluate heuristics in terms of forecast coherence; develop tests to distinguish coherence from accuracy. In our normative benchmark, technology parameters coherently link output-input forecasts. Our positive model rationalizes some heuristics as second-best responses to noisy signals, yielding a pecking order of heuristics. Consistent with our predictions, firm performance is negatively associated with incoherence and incoherent heuristics use. About one-half of CFOs make incoherent forecasts.