Ambiguous Aggregation of Expert Opinions: The Case of Optimal R&D Investment
AbstractHow 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 InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2012.04.
Date of creation: Jan 2012
Date of revision:
Aggregation; Ambiguity; R&D; Expert Opinions; Convex/Conic Optimization;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-08 (All new papers)
- NEP-ENE-2012-03-08 (Energy Economics)
- NEP-INO-2012-03-08 (Innovation)
- NEP-UPT-2012-03-08 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- 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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