45 Pages Posted: 16 Feb 2012 Last revised: 13 Jun 2014
Date Written: February 14, 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..
Keywords: Aggregation, Ambiguity, R&D, Expert Opinions, Convex/Conic Optimization
JEL Classification: C61, D81, Q42
Suggested Citation: Suggested Citation
Athanassoglou, Stergios and Bosetti, Valentina and de Maere d'Aertrycke, Gauthier, Ambiguous Aggregation of Expert Opinions: The Case of Optimal R&D Investment (February 14, 2012). FEEM Working Paper No. 4.2012. Available at SSRN: https://ssrn.com/abstract=2005005 or http://dx.doi.org/10.2139/ssrn.2005005