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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
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Related works:
Working Paper: Strategic Experimentation with Congestion (2014) Downloads
Working Paper: Strategic Experimentation with Congestion (2013) Downloads
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DOI: 10.1257/mic.20170187

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