Ambiguous Aggregation of Expert Opinions: The Case of Optimal R&D Investment
Fondazione Eni Enrico Mattei and Euro-Mediterranean Center for Climate Change
Fondazione Eni Enrico Mattei (FEEM); Bocconi University; CMCC - Euro Mediterranean Centre for Climate Change
Gauthier De Maere d'Aertrycke
Fondazione Eni Enrico Mattei
February 14, 2012
FEEM Working Paper No. 4.2012
How should a decision-maker allocate R&D funds when a group of experts provides divergent estimates on a technology's potential effectiveness? To address this question, we propose a simple decision-theoretic framework that takes into account ambiguity over the aggregation of expert opinion and a decision-maker's attitude towards it. In line with the paper's focus on R&D investment, decision variables in our model may affect experts' subjective probability distributions of the future potential of a technology. Using results from convex optimization, we are able to establish a number of analytical results including a closed-form expression of our model's value function, as well as a thorough investigation of its differentiability properties. We apply our framework to original data from a recent expert elicitation survey on solar technology. The analysis suggests that more aggressive investment in solar technology R&D is likely to yield significant dividends even, or rather especially, after taking ambiguous aggregation into account..
Number of Pages in PDF File: 45
Keywords: Aggregation, Ambiguity, R&D, Expert Opinions, Convex/Conic Optimization
JEL Classification: C61, D81, Q42working papers series
Date posted: February 16, 2012 ; Last revised: June 22, 2012
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