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Free-Riding And Delegation In Research Teams

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  • Nicolas Klein

    (University of Munich)

Abstract

This paper analyzes a two-player game of strategic experimentation with three-armed exponential bandits, where players have to decide in continuous time how to distribute their endowment flow over the arms of their respective bandit. Players face replica bandits, with one arm that is safe in that it generates a known payoff, whereas the likelihood of the risky arms' yielding a positive payoff is initially unknown. It is common knowledge that the types of the two risky arms are perfectly negatively correlated. I show that the efficient policy is incentive-compatible if, and only if, the stakes are high enough. Moreover, learning will be complete in any Markov perfect equilibrium if, and only if, the stakes exceed a certain threshold.

Suggested Citation

  • Nicolas Klein, 2009. "Free-Riding And Delegation In Research Teams," 2009 Meeting Papers 253, Society for Economic Dynamics.
    • Handle: RePEc:red:sed009:253
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    References listed on IDEAS

    as
    1. Nicolas Klein & Sven Rady, 2011. "Negatively Correlated Bandits," Review of Economic Studies, Oxford University Press, vol. 78(2), pages 693-732.
    2. Dinah Rosenberg & Eilon Solan & Nicolas Vieille, 2007. "Social Learning in One-Arm Bandit Problems," Econometrica, Econometric Society, vol. 75(6), pages 1591-1611, November.
    3. Alger Ingela & Ma Ching-to Albert & Renault Regis, 2012. "Experience Benefits and Firm Organization," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-35, September.
    4. Dirk Bergemann & Juuso Välimäki, 2000. "Experimentation in Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(2), pages 213-234.
    5. Rothschild, Michael, 1974. "A two-armed bandit theory of market pricing," Journal of Economic Theory, Elsevier, vol. 9(2), pages 185-202, October.
    6. Alessandro Bonatti & Johannes Horner, 2011. "Collaborating," American Economic Review, American Economic Association, vol. 101(2), pages 632-663, April.
    7. , & ,, 2010. "Strategic experimentation with Poisson bandits," Theoretical Economics, Econometric Society, vol. 5(2), May.
    8. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
    9. Kaylan Chatterjee & Robert Evans, 2004. "Rivals' Search for Buried Treasure: Competition and Duplication in R&D," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 160-183, Spring.
    10. Bergin, James & MacLeod, W Bentley, 1993. "Continuous Time Repeated Games," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(1), pages 21-37, February.
    11. Bank, Peter & Föllmer, Hans, 2003. "American Options, Multi-armed Bandits, and Optimal Consumption Plans : A Unifying View," SFB 373 Discussion Papers 2003,46, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    12. Camargo, Braz, 2007. "Good news and bad news in two-armed bandits," Journal of Economic Theory, Elsevier, vol. 135(1), pages 558-566, July.
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    Cited by:

    1. , & ,, 2010. "Strategic experimentation with Poisson bandits," Theoretical Economics, Econometric Society, vol. 5(2), May.

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    21. repec:cwl:cwldpp:1726rrr is not listed on IDEAS
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