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Bernoulli two-armed bandits with geometric termination

Author

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  • Berry, Donald A.
  • Viscusi, W. Kip

Abstract

The standard Bernoulli two-armed bandit model is modified by terminating the choice problem after the first unsuccessful trial. Both terminal reward situations and instances in which payoffs accrue with each success are considered. For independent machines, the stay-on-a-winner rule holds in each of these instances. Moreover, for the terminal payoff case, staying on a winner is optimal with interdependent machines. Increased prior information concerning the properties of a machine decreases its attractiveness by diminishing the prospect for long-term survival.

Suggested Citation

  • Berry, Donald A. & Viscusi, W. Kip, 1981. "Bernoulli two-armed bandits with geometric termination," Stochastic Processes and their Applications, Elsevier, vol. 11(1), pages 35-45, March.
    • Handle: RePEc:eee:spapps:v:11:y:1981:i:1:p:35-45
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    Cited by:

    1. W. Kip Viscusi & Scott DeAngelis, 2018. "Decision irrationalities involving deadly risks," Journal of Risk and Uncertainty, Springer, vol. 57(3), pages 225-252, December.
    2. W. Kip Viscusi & Richard J. Zeckhauser, 2015. "Regulating Ambiguous Risks: The Less than Rational Regulation of Pharmaceuticals," The Journal of Legal Studies, University of Chicago Press, vol. 44(S2), pages 387-422.

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