FUZZY GROUPING VARIABLES IN ECONOMIC ANALYSIS. A PILOT STUDY OF A VERIFICATION OF A NORMATIVE MODEL FOR R&D ALLIANCES

A. Morrealea, J. Stoklasab and T. Talášekc
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A. Morrealea: School of Business and Management, Lappeenranta University of Technology Skinnarilankatu 34, 53850 Lappeenranta, Finland
J. Stoklasab: School of Business and Management, Lappeenranta University of Technology Skinnarilankatu 34, 53850 Lappeenranta, Finland
T. Talášekc: Palacký University, Olomouc, Faculty of Arts, Department of Applied Economics Krížkovského 8, 771 47 Olomouc, Czech Republic

Fuzzy Economic Review, 2016, vol. 21, issue 2, 19-46

Abstract: Many of the investments decisions facing with uncertainty can be characterized as real options problems. There is evidence of deviation from the predictions derived using such normative models. The proposed research sheds light on the importance of integrating normative models with experimental methods in order to predict and explain such cognitive limitations, in the particular context of R&D alliances. The focus is on appropriate validation of such models on experimental data. We propose a simple design starting from a real options model dealing with alliance timing decisions. We present the decision makers with risky choices formulated as abstract gambling decisions in order to assess their risk propensity and to validate the normative predictions of the model. This paper introduces the basic principles of the use of fuzzy grouping variables in economic analysis. On the survey data gathered to validate the predictive power of the presented model we show that fuzzy sets can be effectively used to partition the experimental data into fuzzy subsets for model verification (e.g. when subgroups cannot be defined in a crisp way). We compare the validation of the model on a full data set with a “refocused” validation on a fuzzy subset of the original sample.

Keywords: R&D alliances; real options; behavioural decision theory; model validation; fuzzy grouping variable (search for similar items in EconPapers)
JEL-codes: C44 C81 O32 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:fzy:fuzeco:v:21:y:2016:i:2:p:19-46

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