Strategic experimentation with privately observed payoffs

Jérôme Renault (), Eilon Solan () and Nicolas Vieille ()
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Jérôme Renault: Toulouse School of Economics (Université Toulouse Capitole)
Eilon Solan: The School of Mathematical Sciences, Tel Aviv University
Nicolas Vieille: HEC Paris

Theoretical Economics, Forthcoming

Abstract: We study a strategic experimentation game with exponential bandits, in which experiment outcomes are private. The equilibrium amount of experimentation is always weakly higher than with public outcomes. Moreover, in pure equilibria, experimentation is never significantly below the socially optimal level and may be strictly higher. We provide a tight bound on the extent of over-experimentation. The analysis rests on a novel encouragement effect.

Keywords: Strategic experimentation; exponential bandit; private payoff (search for similar items in EconPapers)
JEL-codes: C72 C73 (search for similar items in EconPapers)
Date: 2026-05-12
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