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Strongly Symmetric Equilibria in Bandit Games

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Author Info

  • Sven Rady

    (University of Bonn)

  • Nicolas Klein

    (University of Montreal)

  • Johannes Horner

    (Yale University)

Abstract

This paper studies strongly symmetric equilibria (SSE) in continuous-time games of strategic experimentation with Poisson bandits. SSE payoffs can be studied via two functional equations similar to the HJB equation used for Markov equilibria that they generalize. This is valuable for three reasons. First, these equations retain the tractability of Markov equilibrium, while allowing for punishments and rewards: the best and worst equilibrium payoff are explicitly solved for. Second, they capture behavior of the discrete-time game: as period length goes to zero, the SSE payoff set converges to their solution. Third, they encompass a large payoff set: there is no perfect Bayesian equilibrium in the discrete-time game with frequent interactions achieving higher efficiency.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 1107.

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Date of creation: 2013
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Handle: RePEc:red:sed013:1107

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  1. Godfrey Keller & Sven Rady & Martin Cripps, 2005. "Strategic Experimentation with Exponential Bandits," Econometrica, Econometric Society, vol. 73(1), pages 39-68, 01.
  2. Godfrey Keller & Sven Rady, 2005. "Strategic Experimentation with Undiscounted Bandits," 2005 Meeting Papers 473, Society for Economic Dynamics.
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Cited by:
  1. Klein, Nicolas, 2013. "Strategic learning in teams," Games and Economic Behavior, Elsevier, vol. 82(C), pages 636-657.

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