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Strategic experimentation with privately observed payoffs

Author

Listed:
  • Renault, Jérôme

    (Toulouse School of Economics (Université Toulouse Capitole))

  • Solan, Eilon

    (The School of Mathematical Sciences, Tel Aviv University)

  • Vieille, Nicolas

    (HEC Paris)

Abstract

We study a strategic experimentation game with exponential bandits, in which experiment outcomes are private. The equilibrium amount of experimentation is always weakly higher than with public outcomes. Moreover, in pure equilibria, experimentation is never significantly below the socially optimal level and may be strictly higher. We provide a tight bound on the extent of over-experimentation. The analysis rests on a novel encouragement effect.

Suggested Citation

  • Renault, Jérôme & Solan, Eilon & Vieille, Nicolas, 0. "Strategic experimentation with privately observed payoffs," Theoretical Economics, Econometric Society.
    • Handle: RePEc:the:publsh:6927
    as

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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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