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Incomplete Written Contracts: Undescribable States of Nature (Now published in Quarterly Journal of Economics (1994), vol.109, pp.1085-1124.)


  • Luca Anderlini
  • Leonardo Felli


This paper extends the classic two-armed bandit problem to a many-agent setting in which N players each face the same experimentation problem. The difference with the single-agent problem is that agents can now learn from the experiments of others. Thus, experiementation produces a public good and a free-rider problem in experimentation naturally arises. More interestingly, future experimentation by others encourages current individual experimentation. The paper provides an analysis of the set of Markov equilibria in terms of the free-rider effect and the encouragement effect.

Suggested Citation

  • Luca Anderlini & Leonardo Felli, 1993. "Incomplete Written Contracts: Undescribable States of Nature (Now published in Quarterly Journal of Economics (1994), vol.109, pp.1085-1124.)," STICERD - Theoretical Economics Paper Series 263, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  • Handle: RePEc:cep:stitep:263

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