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Strategic learning in teams

  • Klein, Nicolas
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    This paper analyzes a two-player game of strategic experimentation with three-armed exponential bandits in continuous time. Players play bandits of identical types, with one arm that is safe in that it generates a known payoff, whereas the likelihood of the risky armsʼ yielding a positive payoff is initially unknown. When the types of the two risky arms are perfectly negatively correlated, the efficient policy is an equilibrium if and only if the stakes are high enough. If the negative correlation is imperfect and stakes are high, there exists an equilibrium that leads to efficiency for optimistic enough prior beliefs.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0899825613001383
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    Article provided by Elsevier in its journal Games and Economic Behavior.

    Volume (Year): 82 (2013)
    Issue (Month): C ()
    Pages: 636-657

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    Handle: RePEc:eee:gamebe:v:82:y:2013:i:c:p:636-657
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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    1. Dinah Rosenberg & Eilon Solan & Nicolas Vieille, 2004. "Social Learning in One-Arm Bandit Problems," Discussion Papers 1396, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Cripps, Martin & Keller, Godfrey & Rady, Sven, 2003. "Strategic Experimentation with Exponential Bandits," Discussion Papers in Economics 4, University of Munich, Department of Economics.
    3. Kaylan Chatterjee & Robert Evans, 2004. "Rivals' Search for Buried Treasure: Competition and Duplication in R&D," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 160-183, Spring.
    4. Bergin, James & MacLeod, W Bentley, 1993. "Continuous Time Repeated Games," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(1), pages 21-37, February.
    5. Philippe Aghion & Mathias Dewatripont & Jeremy C. Stein, 2005. "Academic Freedom, Private-Sector Focus, and the Process of Innovation," NBER Working Papers 11542, National Bureau of Economic Research, Inc.
    6. Keller, R Godfrey & Rady, Sven, 2009. "Strategic Experimentation with Poisson Bandits," CEPR Discussion Papers 7270, C.E.P.R. Discussion Papers.
    7. Sven Rady & Nicolas Klein, 2008. "Negatively Correlated Bandits," 2008 Meeting Papers 136, Society for Economic Dynamics.
    8. Hörner, Johannes & Klein, Nicolas & Rady, Sven, 2014. "Strongly Symmetric Equilibria in Bandit Games," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 469, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    9. Bank, Peter & Föllmer, Hans, 2003. "American Options, Multi-armed Bandits, and Optimal Consumption Plans : A Unifying View," SFB 373 Discussion Papers 2003,46, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    10. Gustavo Manso, 2011. "Motivating Innovation," Journal of Finance, American Finance Association, vol. 66(5), pages 1823-1860, October.
    11. Camargo, Braz, 2007. "Good news and bad news in two-armed bandits," Journal of Economic Theory, Elsevier, vol. 135(1), pages 558-566, July.
    12. Rothschild, Michael, 1974. "A two-armed bandit theory of market pricing," Journal of Economic Theory, Elsevier, vol. 9(2), pages 185-202, October.
    13. Pauli Murto & Juuso Välimäki, 2011. "Learning and Information Aggregation in an Exit Game," Review of Economic Studies, Oxford University Press, vol. 78(4), pages 1426-1461.
    14. Patrick Bolton & Christopher Harris, 1999. "Strategic Experimentation," Econometrica, Econometric Society, vol. 67(2), pages 349-374, March.
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