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On Games of Strategic Experimentation

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  • Rosenberg, Dinah
  • Salomon , Antoine
  • Vieille , Nicolas

Abstract

We study a class of symmetric strategic experimentation games. Each of two players faces a (exponential) two-armed bandit problem, and must decide when to stop experimenting with the risky arm. The equilibrium amount of experimentation depends on the degree to which experimentation outcomes are observed, and on the correlation between the two individual bandit problems. When experimentation outcomes are public, the game is basically one of strategic complementarities. When experimentation decisions are public, but outcomes are private, the strategic interaction is more complex. We fully characterize the equilibrium behavior in both informational setups, leading to a clear comparison between the two. In particular, equilibrium payoffs are higher when equilibrium outcomes are public.

Suggested Citation

  • Rosenberg, Dinah & Salomon , Antoine & Vieille , Nicolas, 2013. "On Games of Strategic Experimentation," HEC Research Papers Series 1008, HEC Paris.
  • Handle: RePEc:ebg:heccah:1008
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    References listed on IDEAS

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    1. Aoyagi, Masaki, 1998. "Mutual Observability and the Convergence of Actions in a Multi-Person Two-Armed Bandit Model," Journal of Economic Theory, Elsevier, vol. 82(2), pages 405-424, October.
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    Cited by:

    1. Svetlana Boyarchenko, 2020. "Super- and submodularity of stopping games with random observations," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 70(4), pages 983-1022, November.
    2. Kaustav Das & Nicolas Klein & Katharina Schmid, 2020. "Strategic experimentation with asymmetric players," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 69(4), pages 1147-1175, June.
    3. Bonatti, Alessandro & Hörner, Johannes, 2017. "Learning to disagree in a game of experimentation," Journal of Economic Theory, Elsevier, vol. 169(C), pages 234-269.
    4. Heidhues, Paul & Rady, Sven & Strack, Philipp, 2015. "Strategic experimentation with private payoffs," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 531-551.
    5. Khalil, Fahad & Lawarree, Jacques & Rodivilov, Alexander, 2020. "Learning from failures: Optimal contracts for experimentation and production," Journal of Economic Theory, Elsevier, vol. 190(C).
    6. Thomas, Caroline, 2019. "Experimentation with reputation concerns – Dynamic signalling with changing types," Journal of Economic Theory, Elsevier, vol. 179(C), pages 366-415.
    7. Boyarchenko, Svetlana, 2021. "Inefficiency of sponsored research," Journal of Mathematical Economics, Elsevier, vol. 95(C).
    8. Rodivilov, Alexander, 2022. "Monitoring innovation," Games and Economic Behavior, Elsevier, vol. 135(C), pages 297-326.
    9. Margaria, Chiara, 2020. "Learning and payoff externalities in an investment game," Games and Economic Behavior, Elsevier, vol. 119(C), pages 234-250.
    10. KLEIN, Nicolas & WAGNER, Peter, 2018. "Strategic investment and learning with private information," Cahiers de recherche 2018-10, Universite de Montreal, Departement de sciences economiques.
    11. Thomas, Caroline, 2020. "Stopping with congestion and private payoffs," Journal of Mathematical Economics, Elsevier, vol. 91(C), pages 18-42.
    12. Wagner, Peter A. & Klein, Nicolas, 2022. "Strategic investment and learning with private information," Journal of Economic Theory, Elsevier, vol. 204(C).

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    More about this item

    Keywords

    symmetric strategic experimentation games; equilibrium; strategic experimentation;
    All these keywords.

    JEL classification:

    • C00 - Mathematical and Quantitative Methods - - General - - - General

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