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From the Editor's Desk

Bias busters: Taking the 'outside view'

You are the head of a major motion-picture studio, and you must decide whether to greenlight a movie project. You need to predict whether it will be boffo (a box-office hit) or a bust. To make this decision, you must make two interrelated forecasts: the costs of production and potential box-office revenue.

Production costs are easy, you think: you know the shooting days, specific location costs, and computer-generated imagery costs. You can enter these into a spreadsheet that reflects the film's production plan. Potential box-office revenue is harder to predict, but you know roughly how many screens the film will be on during opening weekend, how "hot" your stars are right now, and how much you are going to spend on advertising.

Do you have enough data to make a decision? Maybe. Are the data enough to make the right decision? Probably not. Research shows that film executives overestimate potential box-office revenue most of the time.

Continued here

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