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Strategic Experimentation with Competition and Private Arrival of Information


  • Kaustav Das

    (Department of Economics, University of Exeter)


This paper considers a two-armed bandit problem with one safe arm and one risky arm. The risky arm if good, can potentially experience two kinds of arrivals. One is publicly observable and the other is private to the agent who experiences it. The safe arm experiences publicly observable arrivals according to a given intensity. Private arrivals yield no payoff. Only the first publicly observed arrival(in any of the arms) yields a payo of 1 unit. Players start with a common prior about the quality of the risky arm. It has been shown that in a particular kind symmetric equilibrium, conditional on no arrival players tend to experiment too much along the risky arm if they start with too high a prior and experiment too less if they start with a low prior.

Suggested Citation

  • Kaustav Das, 2014. "Strategic Experimentation with Competition and Private Arrival of Information," Discussion Papers 1404, Exeter University, Department of Economics.
  • Handle: RePEc:exe:wpaper:1404

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    References listed on IDEAS

    1. Nicolas Klein & Sven Rady, 2011. "Negatively Correlated Bandits," Review of Economic Studies, Oxford University Press, vol. 78(2), pages 693-732.
    2. Godfrey Keller & Sven Rady & Martin Cripps, 2005. "Strategic Experimentation with Exponential Bandits," Econometrica, Econometric Society, vol. 73(1), pages 39-68, January.
    3. Patrick Bolton & Christopher Harris, 1999. "Strategic Experimentation," Econometrica, Econometric Society, vol. 67(2), pages 349-374, March.
    4. Fershtman, Chaim & Rubinstein, Ariel, 1997. "A Simple Model of Equilibrium in Search Procedures," Journal of Economic Theory, Elsevier, vol. 72(2), pages 432-441, February.
    5. Rady, Sven & Keller, Godfrey, 2010. "Strategic experimentation with Poisson bandits," Theoretical Economics, Econometric Society, vol. 5(2), May.
    6. Heidhues, Paul & Rady, Sven & Strack, Philipp, 2015. "Strategic experimentation with private payoffs," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 531-551.
    7. 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.
    8. Klein, Nicolas, 2013. "Strategic learning in teams," Games and Economic Behavior, Elsevier, vol. 82(C), pages 636-657.
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    More about this item


    Two-armed Bandit; R&D competition; Duplication; Learning.;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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