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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. Keller, Godfrey & Rady, Sven, 1999. "Optimal Experimentation in a Changing Environment," Review of Economic Studies, Wiley Blackwell, vol. 66(3), pages 475-507, July.
  2. Godfrey Keller & Martin Cripps, 2003. "Strategic Experimentation with Exponential Bandits," Economics Series Working Papers 143, University of Oxford, Department of Economics.
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  8. Dirk Bergemann & Juuso Valimaki, 1996. "Experimentation in Markets," Discussion Papers 1220, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Bulow, Jeremy & Klemperer, Paul, 1994. "Rational Frenzies and Crashes," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 1-23, February.
  10. Patrick Bolton & Christopher Harris, 1999. "Strategic Experimentation," Econometrica, Econometric Society, vol. 67(2), pages 349-374, March.
  11. Martin W. Cripps & Godfrey Keller & Sven Rady, 2002. "Strategic Experimentation: The Case of Poisson Bandits," CESifo Working Paper Series 737, CESifo Group Munich.
  12. 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.
  13. Guiseppe Moscarini & Francesco Squintani, 2004. "Competitive Experimentation with Private Information," Cowles Foundation Discussion Papers 1489, Cowles Foundation for Research in Economics, Yale University.
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