It is important to question the reliability of forecasts because
A) if predictions are too low, a company like Motel 6 might build too many units and thus have a surplus of capacity.
B) uncertainty is black and white, and therefore the gray areas are unimportant.
C) underestimating uncertainty can lead to good competitive strategies.
D) the growth new industries, such as that of telecommunications, cannot be predicted.

Question

Quizplus · Accepted Answer

Some forecasting issues are much more specific to a particular firm and the industry in which it competes. Consider how important it is for Motel 6 to predict future indicators, such as the number of rooms, in the budget segment of the industry. If its predictions are low, it will build too many units, creating a surplus of room capacity that would drive down room rates.

It Is Important to Question the Reliability of Forecasts Because