IDEAS home Printed from https://ideas.repec.org/p/mtl/montec/13-2018.html
   My bibliography  Save this paper

Strategic Investment and Learning with Private Information

Author

Listed:
  • Nicolas KLEIN
  • Peter WAGNER

Abstract

We study a two-player game of strategic experimentation in which agents choose the timing of investments which yield uncertain returns over time. Agents learn about future returns through privately observed signals, others' investment decisions and from public experimentation outcomes when returns are realized. We characterize symmetric equilibria, and we relate the extent of strategic delay of investments in equilibrium to the primitives of the information structure. Agents invest without delay when the most optimistic intermediate belief exceeds a threshold. Otherwise, delay in investments induces a negative learning feed-back which may either escalate or dampen beliefs and investment choices. We highlight how private information in strategic experimentation can increase ex ante welfare because of strategic uncertainty and due to an "encouragement effect of private information".

Suggested Citation

  • Nicolas KLEIN & Peter WAGNER, 2018. "Strategic Investment and Learning with Private Information," Cahiers de recherche 13-2018, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    • Handle: RePEc:mtl:montec:13-2018
    as

    Download full text from publisher

    File URL: http://www.cireqmontreal.com/wp-content/uploads/cahiers/13-2018-cah.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Decamps, Jean-Paul & Mariotti, Thomas, 2004. "Investment timing and learning externalities," Journal of Economic Theory, Elsevier, vol. 118(1), pages 80-102, September.
    2. Murto, Pauli & Välimäki, Juuso, 2013. "Delay and information aggregation in stopping games with private information," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2404-2435.
    3. Godfrey Keller & Sven Rady & Martin Cripps, 2005. "Strategic Experimentation with Exponential Bandits," Econometrica, Econometric Society, vol. 73(1), pages 39-68, January.
    4. Rosenberg, Dinah & Salomon, Antoine & Vieille, Nicolas, 2013. "On games of strategic experimentation," Games and Economic Behavior, Elsevier, vol. 82(C), pages 31-51.
    5. Dinah Rosenberg & Eilon Solan & Nicolas Vieille, 2007. "Social Learning in One-Arm Bandit Problems," Econometrica, Econometric Society, vol. 75(6), pages 1591-1611, November.
    6. Moscarini, Giuseppe & Squintani, Francesco, 2010. "Competitive experimentation with private information: The survivor's curse," Journal of Economic Theory, Elsevier, vol. 145(2), pages 639-660, March.
    7. Chamley, Christophe & Gale, Douglas, 1994. "Information Revelation and Strategic Delay in a Model of Investment," Econometrica, Econometric Society, vol. 62(5), pages 1065-1085, September.
    8. repec:dau:papers:123456789/12074 is not listed on IDEAS
    9. Patrick Bolton & Christopher Harris, 1999. "Strategic Experimentation," Econometrica, Econometric Society, vol. 67(2), pages 349-374, March.
    10. Keller, Godfrey & Rady, Sven, 2010. "Strategic experimentation with Poisson bandits," Theoretical Economics, Econometric Society, vol. 5(2), May.
    11. Heidhues, Paul & Rady, Sven & Strack, Philipp, 2015. "Strategic experimentation with private payoffs," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 531-551.
    12. Siew Hong Teoh, 1997. "Information Disclosure and Voluntary Contributions to Public Goods," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 385-406, Autumn.
    13. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cetemen, Doruk & Hwang, Ilwoo & Kaya, Ayça, 0. "Uncertainty-driven cooperation," Theoretical Economics, Econometric Society.
    2. Thomas, Caroline, 2020. "Stopping with congestion and private payoffs," Journal of Mathematical Economics, Elsevier, vol. 91(C), pages 18-42.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wagner, Peter A., 2018. "Who goes first? Strategic delay under information asymmetry," Theoretical Economics, Econometric Society, vol. 13(1), January.
    2. Heidhues, Paul & Rady, Sven & Strack, Philipp, 2015. "Strategic experimentation with private payoffs," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 531-551.
    3. 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.
    4. Osnat Zohar, 2019. "Boom-Bust Cycles of Learning, Investment and Disagreement," Bank of Israel Working Papers 2019.06, Bank of Israel.
    5. Svetlana Boyarchenko, 0. "Super- and submodularity of stopping games with random observations," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 0, pages 1-40.
    6. 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.
    7. Bonatti, Alessandro & Hörner, Johannes, 2017. "Learning to disagree in a game of experimentation," Journal of Economic Theory, Elsevier, vol. 169(C), pages 234-269.
    8. Francis Bloch & Simona Fabrizi & Steffen Lippert, 2015. "Learning and collusion in new markets with uncertain entry costs," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 58(2), pages 273-303, February.
    9. Amador, Manuel & Weill, Pierre-Olivier, 2012. "Learning from private and public observations of othersʼ actions," Journal of Economic Theory, Elsevier, vol. 147(3), pages 910-940.
    10. Rosenberg, Dinah & Salomon, Antoine & Vieille, Nicolas, 2013. "On games of strategic experimentation," Games and Economic Behavior, Elsevier, vol. 82(C), pages 31-51.
    11. Keller, Godfrey & Rady, Sven, 2015. "Breakdowns," Theoretical Economics, Econometric Society, vol. 10(1), January.
    12. Thomas, Caroline, 2019. "Experimentation with reputation concerns – Dynamic signalling with changing types," Journal of Economic Theory, Elsevier, vol. 179(C), pages 366-415.
    13. Wagner, Peter, 2015. "Who goes first? Strategic Delay and Learning by Waiting," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 500, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    14. Keller, Godfrey & Novák, Vladimír & Willems, Tim, 2019. "A note on optimal experimentation under risk aversion," Journal of Economic Theory, Elsevier, vol. 179(C), pages 476-487.
    15. Kaustav Das, 2014. "Strategic Experimentation with Competition and Private Arrival of Information," Discussion Papers 1404, University of Exeter, Department of Economics.
    16. Margaria, Chiara, 2020. "Learning and payoff externalities in an investment game," Games and Economic Behavior, Elsevier, vol. 119(C), pages 234-250.
    17. Andrei Barbos, 2015. "Information Acquisition and Innovation under Competitive Pressure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(2), pages 325-347, June.
    18. Keller, Godfrey & Rady, Sven, 2020. "Undiscounted bandit games," Games and Economic Behavior, Elsevier, vol. 124(C), pages 43-61.
    19. Xie, Yinxi & Xie, Yang, 2017. "Machiavellian experimentation," Journal of Comparative Economics, Elsevier, vol. 45(4), pages 685-711.
    20. Ganglmair, Bernhard & Simcoe, Timothy & Tarantino, Emanuele, 2018. "Learning When to Quit: An Empirical Model of Experimentation," CEPR Discussion Papers 12733, C.E.P.R. Discussion Papers.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mtl:montec:13-2018. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sharon BREWER). General contact details of provider: http://edirc.repec.org/data/cdmtlca.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.