Strategic Exploration: Pre-emption and Prioritization

Qingmin Liu and Yu Fu Wong

The Review of Economic Studies, 2024, vol. 91, issue 4, 2425-2461

Abstract: This paper analyses a model of strategic exploration in which competing players independently explore a set of alternatives. The model features a multiple-player multiple-armed bandit problem and captures a strategic trade-off between pre-emption—covert exploration of alternatives that the opponent will explore in the future—and prioritization—exploration of the most promising alternatives. Our results explain how the strategic trade-off shapes equilibrium behaviours and outcomes, for example, in technology races between superpowers and R&D competitions between firms. We show that players compete on the same set of alternatives, leading to duplicated exploration from start to finish, and they explore alternatives that are a priori less promising before more promising ones are exhausted. The model also predicts that competition induces players to implement unreliable technologies too early, even though they should wait for the technologies to mature. Coordinated exploration is impossible even if the alternatives are equally promising, but it can emerge in equilibrium following a phase of pre-emptive competition if there is a short deadline. With asymmetric capacities of exploration, the weak player conducts extensive instead of intensive exploration—exploring as many alternatives as the strong player does but never fully exploring any.

Keywords: Strategic exploration; Multiple-armed bandit problem; Mutually greedy strategy; Pre-emption; Prioritization; Superpower competition; R&D competition (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1093/restud/rdad084 (application/pdf)
Access to full text is restricted to 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:oup:restud:v:91:y:2024:i:4:p:2425-2461.

Access Statistics for this article

The Review of Economic Studies is currently edited by Thomas Chaney, Xavier d’Haultfoeuille, Andrea Galeotti, Bård Harstad, Nir Jaimovich, Katrine Loken, Elias Papaioannou, Vincent Sterk and Noam Yuchtman

More articles in The Review of Economic Studies from Review of Economic Studies Ltd
Bibliographic data for series maintained by Oxford University Press (joanna.bergh@oup.com).