Strategic Experimentation with Poisson Bandits
This paper studies a game of strategic experimentation with two-armed bandits where the risky arm distributes lump-sum payoffs according to a Poisson process. The intensity of this process is either high or low, and unknown to the players. We consider Markov perfect equilibria with beliefs as the state variable. There is no equilibrium where all players use cut-off strategies, and all equilibria exhibit an `encouragement effect' relative to the single-agent optimum. The fact that a success on the risky arm is not fully revealing limits the payoff asymmetry as well as the inefficiency of asymmetric equilibria. We construct the unique symmetric MPE and, for a sufficiently high difference between the two possible intensities, an asymmetric equilibrium that dominates the symmetric one in terms of aggregate payoffs.
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|Date of creation:||2007|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
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- Decamps, Jean-Paul & Mariotti, Thomas, 2004. "Investment timing and learning externalities," Journal of Economic Theory, Elsevier, vol. 118(1), pages 80-102, September.
- Nicolas Klein & Sven Rady, 2011.
"Negatively Correlated Bandits,"
Review of Economic Studies,
Oxford University Press, vol. 78(2), pages 693-732.
- Klein, Nicolas & Rady, Sven, 2008. "Negatively Correlated Bandits," CEPR Discussion Papers 6983, C.E.P.R. Discussion Papers.
- Klein, Nicolas & Rady, Sven, 2008. "Negatively Correlated Bandits," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 243, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Klein, Nicolas & Rady, Sven, 2008. "Negatively Correlated Bandits," Discussion Papers in Economics 5332, University of Munich, Department of Economics.
- Sven Rady & Nicolas Klein, 2008. "Negatively Correlated Bandits," 2008 Meeting Papers 136, Society for Economic Dynamics.
- Nicolas Klein & Sven Rady, 2008. "Negatively Correlated Bandits," Working Papers 040, Bavarian Graduate Program in Economics (BGPE).
- Nicolas Klein, 2009. "Free-Riding And Delegation In Research Teams," 2009 Meeting Papers 253, Society for Economic Dynamics.
- Godfrey Keller & Sven Rady & Martin Cripps, 2005. "Strategic Experimentation with Exponential Bandits," Econometrica, Econometric Society, vol. 73(1), pages 39-68, 01.
- Cripps, Martin William & Keller, R Godfrey & Rady, Sven, 2003. "Strategic Experimentation with Exponential Bandits," CEPR Discussion Papers 3814, C.E.P.R. Discussion Papers.
- Cripps, Martin & Keller, Godfrey & Rady, Sven, 2003. "Strategic Experimentation with Exponential Bandits," Discussion Papers in Economics 4, University of Munich, Department of Economics.
- Patrick Bolton & Christopher Harris, 1999. "Strategic Experimentation," Econometrica, Econometric Society, vol. 67(2), pages 349-374, March.
- Rothschild, Michael, 1974. "A two-armed bandit theory of market pricing," Journal of Economic Theory, Elsevier, vol. 9(2), pages 185-202, October.
- Guiseppe Moscarini & Francesco Squintani, 2004. "Competitive Experimentation with Private Information," Cowles Foundation Discussion Papers 1489, Cowles Foundation for Research in Economics, Yale University.
- Dirk Bergemann & Juuso Valimaki, 2006. "Bandit Problems," Cowles Foundation Discussion Papers 1551, Cowles Foundation for Research in Economics, Yale University. Full references (including those not matched with items on IDEAS)
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