Time Predictions: Understanding and Avoiding Unrealism in Project Planning and Everyday Life

time predictions; human judgement; overoptimism; uncertainty; project managemen

Time Predictions

This book is published open access under a CC BY 4.0 license. Predicting the time needed to complete a project, task or daily activity can be difficult and people frequently underestimate how long an activity will take. This book sheds light on why and when this happens, what we should do to avoid it and how to give more realistic time predictions. It describes methods for predicting time usage in situations with high uncertainty, explains why two plus two is usually more than four in time prediction contexts, reports on research on time prediction biases, and summarizes the evidence in support of different time prediction methods and principles. Based on a comprehensive review of the research, it is the first book summarizing what we know about judgment-based time predictions. Large parts of the book are directed toward people wishing to achieve better time predictions in their professional life, such as project managers, graphic designers, architects, engineers, film producers, consultants, software developers, or anyone else in need of realistic time usage predictions. It is also of benefit to those with a general interest in judgment and decision-making or those who want to improve their ability to predict and plan ahead in daily life

Time Predictions: Understanding and Avoiding Unrealism in Project Planning and Everyday Life

time predictions; human judgement; overoptimism; uncertainty; project managemen

Least Present Value of Net Revenue: a new auction-mechanism for highway concessions

This paper presents a new mechanism for awarding tolled-highways, based on the variable-term concept proposed by Engel et al (1997). These authors claim that a mechanism based on bids for least-present-value of revenue (LPVR) eliminates the risk of demand and simplifies renegotiations. However, if maintenance and operation costs are non-negligible, it is proven that, under LPVR, bidders need to estimate future traffic to make their offers, so the risk of demand is still present. Moreover, LPVR does not guarantee the selection of the best concessionaire. An alternative mechanism (least-present-value of net revenue, LPVNR) is proposed. The idea is to use bids that do not force firms to estimate future traffic. Under LPVNR, firms must make offers on: (i) total amount of revenue, net of maintenance costs; (ii) annual operation and routine-maintenance costs; and (iii) cost of road re-pavement. The concession is awarded to the firm with the lowest total expected cost, and the selection rule is adapted to the information available. The new mechanism is simple, does not impose additional efforts from firms, and eliminates the risk of demand more effectively. Although initially conceived for the road sector, the idea of LPVNR could easily be extended to other infrastructure sectors.Highways, roads, concessions, auctions

Playing at Serial Acquisitions

Behavioral biases can result in suboptimal acquisition decisions-with the potential for errors exacerbated in consolidating industries, where consolidators design serial acquisition strategies and fight escalating takeover battles for platform companies that may determine their future competitive position. To guide objective managerial judgment, and to rationally anticipate the irrational behavior of rival bidders or financial markets, this article proposes a modified option-game toolkit for serial acquisition strategy. It brings together insights from both strategy and finance, which quantify acquisition strategies, thus allowing executives to make rational intuitive decisions under uncertainty

PROGRAM MANAGER DECISION-MAKING IN COMPLEX AND CHAOTIC PROGRAM ENVIRONMENTS

Our project focuses on the decision-making process of a program manager (PM). A defense program manager is routinely exposed to chaotic and complex environments that require skilled leadership and decision-making. Exploring the decision-making process in these environments may help current and future defense programs to better project the outcome of future decisions. Through our research, we identified five categories as decision-making pitfalls for PMs: overly optimistic, risk aversion, stovepipe design, strategic networking in the acquisition environment, and communication skills. We recommend conducting future research to validate the findings of our study. Once validated, we recommend refining PM training to focus on the decision-making categories we identified to help PMs navigate programs more successfully.Approved for public release. Distribution is unlimited.Lieutenant, United States NavyLieutenant, United States NavyLieutenant, United States Nav

Least Present Value of Net Revenue: a new auction-mechanism for highway concessions

This paper presents a new mechanism for awarding tolled-highways, based on the variable-term concept proposed by Engel et al (1997). These authors claim that a mechanism based on bids for least-present-value of revenue (LPVR) eliminates the risk of demand and simplifies renegotiations. However, if maintenance and operation costs are non-negligible, it is proven that, under LPVR, bidders need to estimate future traffic to make their offers, so the risk of demand is still present. Moreover, LPVR does not guarantee the selection of the best concessionaire. An alternative mechanism (least-present-value of net revenue, LPVNR) is proposed. The idea is to use bids that do not force firms to estimate future traffic. Under LPVNR, firms must make offers on: (i) total amount of revenue, net of maintenance costs; (ii) annual operation and routine-maintenance costs; and (iii) cost of road re-pavement. The concession is awarded to the firm with the lowest total expected cost, and the selection rule is adapted to the information available. The new mechanism is simple, does not impose additional efforts from firms, and eliminates the risk of demand more effectively. Although initially conceived for the road sector, the idea of LPVNR could easily be extended to other infrastructure sectors

Least Present Value of Net Revenue: a new auction-mechanism for highway concessions

This paper presents a new mechanism for awarding tolled-highways, based on the variable-term concept proposed by Engel et al (1997). These authors claim that a mechanism based on bids for least-present-value of revenue (LPVR) eliminates the risk of demand and simplifies renegotiations. However, if maintenance and operation costs are non-negligible, it is proven that, under LPVR, bidders need to estimate future traffic to make their offers, so the risk of demand is still present. Moreover, LPVR does not guarantee the selection of the best concessionaire. An alternative mechanism (least-present-value of net revenue, LPVNR) is proposed. The idea is to use bids that do not force firms to estimate future traffic. Under LPVNR, firms must make offers on: (i) total amount of revenue, net of maintenance costs; (ii) annual operation and routine-maintenance costs; and (iii) cost of road re-pavement. The concession is awarded to the firm with the lowest total expected cost, and the selection rule is adapted to the information available. The new mechanism is simple, does not impose additional efforts from firms, and eliminates the risk of demand more effectively. Although initially conceived for the road sector, the idea of LPVNR could easily be extended to other infrastructure sectors

The Bidder's Curse

We employ a novel approach to identify overbidding in the field. We compare auction prices to fixed prices for the same item on the same webpage. In detailed board-game data, 42 percent of auctions exceed the simultaneous fixed price. The result replicates in a broad cross-section of auctions (48 percent). A small fraction of overbidders, 17 percent, suffices to generate the overbidding. The observed behavior is inconsistent with rational behavior, even allowing for uncertainty and switching costs, since also the expected auction price exceeds the fixed price. Limited attention to outside options is most consistent with our results.