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Strategic experimentation : a revision

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Author Info
Bolton, P. (Tilburg University, Center for Economic Research)
Abstract

This paper extends the classic two-armed bandit problem to a many-agent setting in which I players each face the same experi- mentation problem. The main change from the single-agent prob- lem is that an agent can now learn from the current experimentation of other agents. Information is therefore a public good, and a free- rider problem in experimentation naturally arises. More interestingly, the prospect of future experimentation by others encourages agents to increase current experimentation, in order to bring forward the time at which the extra information generated by such experimenta- tion becomes available. The paper provides an analysis of the set of stationary Markov equilibria in terms of the free-rider e ect and the encouragement e ect. The paper is a revision of our earlier paper, Bolton and Harris [7]. The main modi cation concerns the formulation of randomization in continuous time. C.f. Harris [12]. The earlier paper explored one formulation based on the idea of rapid alternation over the state space. The current paper explores a formulation which is the closest analogue of the discrete-time formulation. It is based on the idea of randomization at each instant of time.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 27.

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Date of creation: 1996
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Handle: RePEc:dgr:kubcen:199627

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  1. Chamley, Christophe & Gale, Douglas, 1994. "Information Revelation and Strategic Delay in a Model of Investment," Econometrica, Econometric Society, vol. 62(5), pages 1065-85, September. [Downloadable!] (restricted)
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  2. Ellison, Glenn & Fudenberg, Drew, 1993. "Rules of Thumb for Social Learning," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 612-43, August. [Downloadable!] (restricted)
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  3. Mirman, L.J. & Samuelson, L. & Urbano, A., 1989. "Duopoly Signal Jamming," Papers 8-89-8, Pennsylvania State - Department of Economics.
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  4. Kenneth Hendricks & Dan Kovenock, 1989. "Asymmetric Information, Information Externalities, and Efficiency: The Case of Oil Exploration," RAND Journal of Economics, The RAND Corporation, vol. 20(2), pages 164-182, Summer. [Downloadable!] (restricted)
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  5. Aghion, Philippe & Espinosa, Maria Paz & Jullien, Bruno, 1993. "Dynamic Duopoly with Learning through Market Experimentation," Economic Theory, Springer, vol. 3(3), pages 517-39, July.
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  6. Harris, C., 1993. "Generalized Solutions of Stochastic Differential Games in One Dimension," Papers 44, Boston University - Industry Studies Programme.
  7. Christopher Harris, 1993. "Generalized Solutions of Stochastic Differential Games in One Dimension," Papers 0044, Boston University - Industry Studies Programme.
  8. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October. [Downloadable!] (restricted)
  9. Bhattacharya, Sudipto & Chatterjee, Kalyan & Samuelson, Larry, 1986. "Sequential Research and the Adoption of Innovations," Oxford Economic Papers, Oxford University Press, vol. 38(0), pages 219-43, Suppl. No. [Downloadable!] (restricted)
  10. Rothschild, Michael, 1974. "A two-armed bandit theory of market pricing," Journal of Economic Theory, Elsevier, vol. 9(2), pages 185-202, October. [Downloadable!] (restricted)
  11. Aghion Philippe & Bolton, Patrick & Harris Christopher & Jullien Bruno, 1991. "Optimal learning by experimentation," CEPREMAP Working Papers (Couverture Orange) 9104, CEPREMAP.
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  12. McLennan, Andrew, 1984. "Price dispersion and incomplete learning in the long run," Journal of Economic Dynamics and Control, Elsevier, vol. 7(3), pages 331-347, September. [Downloadable!] (restricted)
  13. Vives, X., 1993. "Learning from Others," UFAE and IAE Working Papers 206.93, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  14. Aghion, Philippe, et al, 1991. "Optimal Learning by Experimentation," Review of Economic Studies, Blackwell Publishing, vol. 58(4), pages 621-54, July. [Downloadable!] (restricted)
  15. Rob, Rafael, 1991. "Learning and Capacity Expansion under Demand Uncertainty," Review of Economic Studies, Blackwell Publishing, vol. 58(4), pages 655-75, July. [Downloadable!] (restricted)
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