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Managing Multiple Research Projects

  • Alejandro Francetich
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    A decision maker can experiment on up to two alternatives simultaneously over time. One and only one of these alternatives can produce successes, according to a Poisson process with known arrival rate; but there is uncertainty as to which alternative is the profitable one. The decision maker only observes the outcomes of the alternatives chosen, and choosing each alternative entails a cost. Simultaneous experimentation involves higher costs but can produce more data. At the same time, since the alternatives are negatively correlated, the outcomes of either one are informative about the other. If the costs are high and she is sufficiently impatient, the decision maker never experiments on both alternatives at once. Otherwise, if she starts with a single alternative that produces no successes, she becomes gradually pessimistic and eventually takes on the other alternative while keeping the first one — despite the higher costs and the negative correlation. Keywords: Experimentation, two-armed bandits, multi-choice bandits, negatively correlated arms, Poisson process JEL Classification Numbers: D83, D90

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    File URL: ftp://ftp.igier.unibocconi.it/wp/2014/516.pdf
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    Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 516.

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    Date of creation: 2014
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    Handle: RePEc:igi:igierp:516
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    1. Jean Guillaume Forand, 2010. "Keeping Your Options Open," RCER Working Papers 557, University of Rochester - Center for Economic Research (RCER).
    2. Keller, Godfrey & Rady, Sven, 2009. "Strategic Experimentation with Poisson Bandits," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 260, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    3. Nicolas Klein & Sven Rady, 2008. "Negatively Correlated Bandits," Working Papers 040, Bavarian Graduate Program in Economics (BGPE).
    4. Bergemann, Dirk & Valimaki, Juuso, 2001. "Stationary multi-choice bandit problems," Journal of Economic Dynamics and Control, Elsevier, vol. 25(10), pages 1585-1594, October.
    5. Nyarko, Yaw, 1994. "On the Convexity of the Value Function in Bayesian Optimal Control Problems," Economic Theory, Springer, vol. 4(2), pages 303-09, March.
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