Optimal investment and the ambiguous aggregation of expert opinions
Stergios Athanassoglou,
Valentina Bosetti and
Gauthier de Maere d'Aertryckey
Authors registered in the RePEc Author Service: Stergios Athanasoglou
No 468, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University
Abstract:
How should a decision-maker assess the potential of an investment when a group of experts provides strongly divergent estimates on its expected payoff? To address this question, we propose and analyze a variant of the well-studied -maxmin model in decision theory. In our framework, and consistent to the paper's empirical focus on R&D investment, experts' subjective probability distributions are allowed to be action-dependent. In addition, the decision maker constrains the sets of priors to be considered in accordance with ethical considerations and/or operational protocols. Using tools from convex and conic optimization, we are able to establish a number of analytical results including a closed-form expression of our model's value function, a thorough investigation of its differentiability properties, and necessary conditions for optimal investment. 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 ambiguity into account. Keywords: expert aggregation; ambiguity; -maxmin; second-order cone programming; renewable energy R&D
Date: 2012
New Economics Papers: this item is included in nep-cdm and nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://repec.unibocconi.it/igier/igi/wp/2012/468.pdf (application/pdf)
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:igi:igierp:468
Ordering information: This working paper can be ordered from
https://repec.unibocconi.it/igier/igi/
Access Statistics for this paper
More papers in Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University via Rontgen, 1 - 20136 Milano (Italy).
Bibliographic data for series maintained by ().