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Experimentation with accumulation

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  • Maria Antonieta Cunha-e-Sa
  • Vasco Santos

Abstract

We study signal-dependent experimentation in the presence of accumulation and show that the passive-learner’s action surprisingly coincides with the experimentor’s when the unknown term is the one determining the decay rate of the stock, while they differ when the parameter being learned is the one measuring the accumulation rate. These results highlight the importance of the dynamic structure of the problem in signal-dependent experimentation. Moreover, they have important consequences for the pollutionaccumulation debate currently in progress.

Suggested Citation

  • Maria Antonieta Cunha-e-Sa & Vasco Santos, 2007. "Experimentation with accumulation," Nova SBE Working Paper Series wp503, Universidade Nova de Lisboa, Nova School of Business and Economics.
  • Handle: RePEc:unl:unlfep:wp503
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