Optimal decision indices for R&D project evaluation in the pharmaceutical industry: Pearson index versus Gittins index |
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Authors: | Michael A Talias |
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Institution: | School of Humanities and Social Sciences, International University Bremen, P.O. Box 750561, 28725 Bremen, Germany |
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Abstract: | This paper examines issues related to various decision-based analytic approaches to sequential choice of projects, with special motivation from and application in the pharmaceutical industry. In particular, the Pearson index and Gittins index are considered as key strategic decision-making tools for the selection of R&D projects. It presents a proof of optimality of the Pearson index based on the Neyman–Pearson lemma. Emphasis is also given to how a project manager may differentiate between the two indices based on concepts from statistical decision theory. This work demonstrates and justifies the correct use of the Pearson index. |
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Keywords: | Gittins index Pearson index Project prioritization Research and development in pharmaceutical industry Statistical decision theory |
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