Discussion on “China Goes for (All of) the Gold: Economists predict whether the host country will rule the Beijing Olympics” (Slate, 2008) and “China’s Winning Ways: Did economists correctly predict who would win at the Beijing Olympics?” (Newsweek, 2008), both by Daniel Gross.
Top accounting firm PWC and renowned economist Andrew Bernard attempted to apply the economic principles of demand estimation to predict the number of medals each country in the Olympics would win. To create their models they used factors such as population and income levels, which are necessary for demand estimation of economic markets, but were irrelevant in determining how many medals each country would take home. They considered other factors in their predictions that were more relevant, however, to accurately determine medals wins using their models is nearly impossible.
The determinants they included were : homefield advantage, size and growth of national economies, past political affiliations, market share. The determinants had a correlation with winning potential, but did not necessarily indicate causation. They might have boosted chances but, by such an insignificant amount that it didn’t determine winning potential.
Retail buying is another example of demand estimation. Buyers are responsible for stocking stores with the appropriate amounts of the right items. For example, buyers have to look at various factors in demography to determine what quantity of sizes of a t-shirt their company might sell in any given area.
Posted by Kelsey, Blaise and Crystal (Section 3)