Strategic Experimentation with Congestion

Caroline Thomas ()

American Economic Journal: Microeconomics, 2021, vol. 13, issue 1, 1-82

Abstract: This paper considers a two-player game of strategic experimentation with competition. Each agent faces a two-armed bandit problem where she continually chooses between her private, risky arm and a common, safe arm. Each agent has exclusive access to her private arm. However, the common arm can only be activated by one agent at a time. This congestion creates negative payoff externalities. Our main finding is that congestion gives rise to new strategic considerations: players perceive a strategic option value from occupying the common arm, making it more attractive than in the absence of competition or when switching is irreversible.

JEL-codes: C72 C73 D62 D83 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/mic.20170187 (application/pdf)
https://www.aeaweb.org/doi/10.1257/mic.20170187.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

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:aea:aejmic:v:13:y:2021:i:1:p:1-82

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/mic.20170187

Access Statistics for this article

American Economic Journal: Microeconomics is currently edited by Johannes Hörner

More articles in American Economic Journal: Microeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().