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Experimentation with Accumulation

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Author Info
Sa, Maria Antonieta Cunha e
Santos, Vasco
Abstract

We study signal-dependent experimentation in the presence of accumulation and show that the passive-learner’s action surprisingly coincides with the experimentor’s when the unknown term is the one determining the decay rate of the stock, while they differ when the parameter being learned is the one measuring the accumulation rate. These results highlight the importance of the dynamic structure of the problem in signal-dependent experimentation. Moreover, they have important consequences for the pollutionaccumulation debate currently in progress.

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Paper provided by Universidade Nova de Lisboa, Faculdade de Economia in its series FEUNL Working Paper Series with number wp503.

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Length: 26 pages
Date of creation: 2007
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Handle: RePEc:unl:unlfep:wp503

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