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Related Experiment Video

Updated: Apr 15, 2026

Watershed Planning within a Quantitative Scenario Analysis Framework
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Shared investment projects and forecasting errors: setting framework conditions for coordination and sequencing data

Stephan Leitner1, Alexander Brauneis2, Alexandra Rausch1

  • 1Faculty of Management and Economics, Institute of Business Management, Alpen-Adria Universität, Klagenfurt, Austria.

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|March 25, 2015
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Summary

This study explores how forecasting errors affect distributed investment decisions in firms. It finds that some forecasting inaccuracies can benefit firms by maximizing value and offers strategies to improve forecast robustness.

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Area of Science:

  • Decision Sciences
  • Computational Economics
  • Organizational Behavior

Background:

  • Distributed investment decisions within firms are complex and prone to coordination challenges.
  • Inaccurate forecasts regarding investment costs, cash flows, and departmental efficiency can significantly hinder effective decision-making.

Purpose of the Study:

  • To investigate the impact of forecasting inaccuracies on the coordination of distributed investment decisions.
  • To propose and evaluate a budget allocation mechanism for coordinating these decisions.
  • To provide guidance on optimizing framework conditions and forecasting quality for enhanced robustness.

Main Methods:

  • Development of a computational multi-agent model simulating a stylized firm.
  • Analysis of investment opportunities carried out by organizational departments.
  • Proposal of a budget allocation mechanism and investigation of framework conditions.

Main Results:

  • A budget allocation mechanism is proposed to coordinate distributed investment decisions.
  • Framework conditions (number of opportunities/departments) can be set to enhance robustness to forecasting errors.
  • A certain degree of misforecasting can be beneficial for value maximization; optimal sequencing of forecasting improvements is crucial.

Conclusions:

  • The proposed coordination mechanism enhances robustness to forecasting errors under specific framework conditions.
  • Strategic management of forecasting quality and sequencing of improvements is vital for firm value maximization.
  • The findings offer practical guidance for firms managing distributed investments and forecasting uncertainties.