Competitive Exposure and Entrepreneurial Experimentation

Joshua Gans

No 35172, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Entrepreneurs learn by experimenting, but experiment choices are often public. A closed beta, private pilot, or public launch not only generates evidence; it also reveals what kind of entrepreneur would choose that action. We develop a dynamic model in which a founder chooses between stealthy and public experiments while potential entrants infer from both actions and outcomes. Public outcomes are modelled as garblings of the founder's private experimental evidence, so public leakage informs outsiders without giving the founder information beyond the private signal already observed. The key state variable is competitive exposure: the public runway before entry becomes attractive. Exposure is depleted by two forces, leakage burn from public outcomes, and action burn from public inference about experiment choice. This distinction implies that competition can distort experiment design without forcing earlier scale: lower-confidence founders choose stealthier tests, while higher-confidence founders spend exposure to obtain faster private learning through more public tests. Scale is accelerated only when exposure reduces the value of waiting more than it reduces the value of scaling. Finally, exogenous funding gates make observable scale more selective and, therefore, more informative to entrants. The analysis shows that entrepreneurial experimentation is not merely private learning under uncertainty; it is public action under competitive inference.

JEL-codes: O30 O33 (search for similar items in EconPapers)
Date: 2026-05
Note: PR
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w35172.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:35172

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w35172
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().