Risk aggregation and the efficient selection of joint projects by a consortium

John A. Aloysius

Omega, 1999, vol. 27, issue 3, 389-396

Abstract: This paper analyzes the impact of risk attitudes on project funding decisions in research consortia. We outline an expected utility framework and show that aggregation of risk reduces risk aversion. We analyze the effects of managerial risk attitudes on the decision making process for R&D investment. We show that when funding research projects, firms should consider projects collectively rather than individually. The pooling of risk among projects can reduce inefficiencies in funding decisions. Furthermore, we show that participation in a consortium can increase efficiency in funding decisions, as the pooling of risk among firms can also alleviate risk aversion.

Keywords: Risk; Risk; aggregation; Decision; analysis; Capital; budgeting; Project; selection; Efficiency (search for similar items in EconPapers)
Date: 1999
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0305-0483(98)00063-2
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jomega:v:27:y:1999:i:3:p:389-396

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/supportfaq.cws_home/regional
https://shop.elsevie ... _01_ooc_1&version=01

Access Statistics for this article

Omega is currently edited by B. Lev

More articles in Omega from Elsevier
Bibliographic data for series maintained by Catherine Liu ().