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Ambiguous Aggregation of Expert Opinions: The Case of Optimal R&D Investment

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  • Stergios Athanassoglou

    (Fondazione Eni Enrico Mattei and Euro-Mediterranean Center for Climate Change)

  • Valentina Bosetti

    (Fondazione Eni Enrico Mattei and Euro-Mediterranean Center for Climate Change)

  • Gauthier de Maere d'Aertrycke

    (Fondazione Eni Enrico Mattei and Euro-Mediterranean Center for Climate Change, Italy)

Abstract

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.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2012.04.

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Date of creation: Jan 2012
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Handle: RePEc:fem:femwpa:2012.04

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Keywords: Aggregation; Ambiguity; R&D; Expert Opinions; Convex/Conic Optimization;

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  1. Valentina Bosetti, Carlo Carraro, Marzio Galeotti, Emanuele Massetti, Massimo Tavoni, 2006. "A World induced Technical Change Hybrid Model," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 13-38.
  2. Baker, Erin & Chon, Haewon & Keisler, Jeffrey, 2009. "Advanced solar R&D: Combining economic analysis with expert elicitations to inform climate policy," Energy Economics, Elsevier, vol. 31(Supplemen), pages S37-S49.
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