Finding Common Ground When Experts Disagree: Belief Dominance Over Portfolios of Alternatives

35 Pages Posted: 28 Jul 2016

See all articles by Erin Baker

Erin Baker

University of Massachusetts at Amherst - Mechanical and Industrial Engineering Department

Valentina Bosetti

Bocconi University; CMCC - Euro Mediterranean Centre for Climate Change

Ahti Salo

Aalto University - School of Science

Date Written: July 28, 2016

Abstract

We address the problem of choosing a portfolio of policies under “deep uncertainty.” We introduce the idea of belief dominance as a way to derive a set of non-dominated portfolios and robust individual alternatives. Our approach departs from the tradition of providing a single recommended portfolio; rather, it derives a group of good portfolios. The belief dominance concept allows us to synthesize multiple expert- or model-based beliefs by uncovering the range of alternatives that are intelligent responses to the range of beliefs. This goes beyond solutions that are optimal for any specific set of beliefs to uncover other defensible solutions that may not otherwise be revealed. We illustrate our approach using an important problem in the climate change and energy policy context: choosing among clean energy technology R&D portfolios. We demonstrate how the belief dominance concept can reveal portfolios and alternatives that would otherwise remain uncovered.

Keywords: Deep Uncertainty, Decision Making under Uncertainty, Robust, Dominance

JEL Classification: D8, D78, D81

Suggested Citation

Baker, Erin and Bosetti, Valentina and Salo, Ahti, Finding Common Ground When Experts Disagree: Belief Dominance Over Portfolios of Alternatives (July 28, 2016). FEEM Working Paper No. 46.2016, Available at SSRN: https://ssrn.com/abstract=2815365 or http://dx.doi.org/10.2139/ssrn.2815365

Erin Baker

University of Massachusetts at Amherst - Mechanical and Industrial Engineering Department ( email )

Department of Operations and Information Managemen
Amherst, MA 01003
United States

Valentina Bosetti (Contact Author)

Bocconi University

Via Gobbi 5
Milan, 20136
Italy

CMCC - Euro Mediterranean Centre for Climate Change

via Augusto Imperatore, 16
Lecce, I-73100
Italy

Ahti Salo

Aalto University - School of Science ( email )

Espoo
Finland

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