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Outline of frequencies versus most-likely experiment
Method and results from Green and Armstrong (2004)1
We asked 52 university students to make predictions about conflict situations. We gave each student four conflicts
from a set of eight. We asked half our participants to assume there were 100 situations similar to a target conflict.
We then asked them “…in how many of these situations would…” each one of a list of possible outcomes occur?
The full question for one of the conflicts, Telco Takeover, is shown in Exhibit 1. We told the other participants to
choose the most likely outcome from a list (Exhibit 2).
Exhibit 1
Assume there are 100 situations similar to the one described, in how many of these situations would…
a. The takeover bid fail completely? [___] out of 100
b. The mobile operation alone be purchased? [___] out of 100
c. The takeover succeed at, or close to, the offer price? [___] out of 100
d. The takeover succeed at a substantial premium over the offer price? [___] out of 100
Exhibit 2
How was the stand-off between Localville and Expander resolved? (check one 9 or %)
a. Expander’s takeover bid failed completely [___]
b. Expander purchased Localville’s mobile operation only [___]
c. Expander’s takeover succeeded at, or close to, their August 14 offer price of $43-per-share [___]
d. Expander’s takeover succeeded at a substantial premium over the August 14 offer price [___]
We looked at the accuracy of the option chosen, or allocated the highest frequency or percentage, by the
participants. On that basis, as the following table shows, there was no difference in the average accuracy of forecasts
from the two approaches.
Accuracy of novices forecasts
Percent correct forecasts (number of forecasts)
Chance Frequencies Most-likely Total
55% Pay Plan 25 0 (12) 9 (11) 4 (23)
Artists Protest 17 10 (10) 0 (11) 5 (21)
Distribution Channel 33 23 (13) 38 (13) 31 (26)
Personal Grievance 25 11 (9) 46 (13) 32 (22)
Telco Takeover 25 50 (12) 25 (12) 38 (24)
Zenith Investment 33 40 (10) 42 (12) 41 (22)
Water Dispute 33 67 (12) 42 (12) 54 (24)
Nurses Dispute 33 64 (11) 58 (12) 61 (23)
Averages (unweighted) 28 33 (89) 33 (96) 33 (185)
1 Green, K. C., J. S. Armstrong. 2004. On the value of expertise for forecasting decisions in conflicts. Working
paper: Monash University