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Social Learning in One-Arm Bandit Problems

  • Dinah Rosenberg
  • Eilon Solan
  • Nicolas Vieille

We study a two-player one-arm bandit problem in discrete time, in which the risky arm can have two possible types, high and low, the decision to stop experimenting is irreversible, and players observe each other's actions but not each other's payoffs. We prove that all equilibria are in cutoff strategies and provide several qualitative results on the sequence of cutoffs. Copyright The Econometric Society 2007.

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File URL: http://hdl.handle.net/10.1111/j.1468-0262.2007.00807.x
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Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 75 (2007)
Issue (Month): 6 (November)
Pages: 1591-1611

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Handle: RePEc:ecm:emetrp:v:75:y:2007:i:6:p:1591-1611
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  1. Cripps, Martin William & Keller, R Godfrey & Rady, Sven, 2003. "Strategic Experimentation with Exponential Bandits," CEPR Discussion Papers 3814, C.E.P.R. Discussion Papers.
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  3. Bulow, Jeremy I. & Klemperer, Paul, 1991. "Rational Frenzies and Crashes," CEPR Discussion Papers 593, C.E.P.R. Discussion Papers.
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  7. Caplin, Andrew & Leahy, John, 1994. "Business as Usual, Market Crashes, and Wisdom after the Fact," American Economic Review, American Economic Association, vol. 84(3), pages 548-65, June.
  8. Patrick Bolton & Christopher Harris, 1999. "Strategic Experimentation," Econometrica, Econometric Society, vol. 67(2), pages 349-374, March.
  9. Godfrey Keller & Sven Rady, 1998. "Optimal Experimentation in a Changing Environment," Game Theory and Information 9801001, EconWPA.
  10. Gale, D. & Chamley, C., 1992. "Information Revelation and Strategic Delay in a Model of Investment," Papers 10, Boston University - Department of Economics.
  11. Guiseppe Moscarini & Francesco Squintani, 2004. "Competitive Experimentation with Private Information," Cowles Foundation Discussion Papers 1489, Cowles Foundation for Research in Economics, Yale University.
  12. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010. "A theory of Fads, Fashion, Custom and cultural change as informational Cascades," Levine's Working Paper Archive 1193, David K. Levine.
  13. Martin W. Cripps & Godfrey Keller & Sven Rady, 2002. "Strategic Experimentation: The Case of Poisson Bandits," CESifo Working Paper Series 737, CESifo Group Munich.
  14. Chamley, Christophe, 2004. "Delays and equilibria with large and small information in social learning," European Economic Review, Elsevier, vol. 48(3), pages 477-501, June.
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