Causal forecasting methods

Causal Causal forecasting methods assume that the demand forecast is highly correlated with certain factors in the environment (the state of the economy, interest rates, etc.). Causal forecasting methods find this correlation between demand and environmental factors and use estimates of what environmental factors will be to forecast future demand. For example, product pricing is strongly correlated with demand. Companies can thus use causal methods to determine the impact of price promotions on demand. 

Simulation Simulation forecasting methods imitate the consumer choices that give rise to demand to arrive at a forecast. Using simulation, a firm can combine time-series and causal methods to answer such questions as What will be the impact of a price promotion What will be the impact of a competitor opening a store nearby Airlines simulate customer buying behavior to forecast demand for higher-fare seats when no seats are available at lower fares. 

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