On games of strategic experimentation

Dinah Rosenberg, Antoine Salomon and Nicolas Vieille ()

Games and Economic Behavior, 2013, vol. 82, issue C, 31-51

Abstract: We study a class of symmetric strategic experimentation games. Each of two players faces an (exponential) two-armed bandit problem, and must decide when to stop experimenting with the risky arm. The equilibrium amount of experimentation depends on the degree to which experimentation outcomes are observed, and on the correlation between the two individual bandit problems. When experimentation outcomes are public, the game is basically one of strategic complementarities. When experimentation decisions are public, but outcomes are private, the strategic interaction is more complex. We fully characterize the equilibrium behavior in both informational setups, leading to a clear comparison between the two. In particular, equilibrium payoffs are higher when equilibrium outcomes are public.

Keywords: Strategic experimentation; Optimal stopping; Real options; Incomplete information (search for similar items in EconPapers)
JEL-codes: D82 D83 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Working Paper: On Games of Strategic Experimentation (2013)
Working Paper: On Games of Strategic Experimentation (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:82:y:2013:i:c:p:31-51

DOI: 10.1016/j.geb.2013.06.006

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