ROYAL OAK – Well known Michigan economist Patrick Anderson has been given the Edward A. Mennis Award for outstanding writing in the field of business economics. Patrick joins M2 Techcast co-hosts Mike Brennan and Matt Roush to discuss this honor from the National Association of Business Economics.

Anderson is Principal and CEO of Anderson Economic Group. At the awards ceremony on Sept. 30, Patrick presented a paper, “Business Strategy and Firm Location Decisions: Testing Traditional and Modern Methods” will be published in the Business Economics journal.

Patrick Anderson

On September 7, 2017, Amazon released its RFP to build a second corporate headquarters. Shortly after that, the Anderson HQ2 Index was released. The Index was strikingly accurate in predicting which cities would be selected to move onto the next round in the site selection process for Amazon’s next headquarters. Following the release of the Index, Patrick decided to apply different methods to the prediction, and to compare the success of those methods.

In his report, Anderson examined this debated question of where Amazon will open its second headquarters. The paper applies three approaches to the Amazon decision: an income model; a value model; and machine learning models. The paper found that expert judgement from a business economist outperformed the machine learning models. Additionally, the model of a value-maximizing firm outperformed the income model using the same data, and captured valuable intuition that a traditional model would have missed. The paper questions whether machine learning or human input is more valuable when making an important business decision.

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