Pack Light on the Move: Exploitation and Exploration in a Dynamic Environment

Marco LiCalzi and Davide Marchiori ()
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Davide Marchiori: Università Ca’ Foscari Venezia

A chapter in Artificial Economics and Self Organization, 2014, pp 205-216 from Springer

Abstract: Abstract This paper revisits a recent study by Posen and Levinthal (Manag Sci 58:587–601, 2012) on the exploration/exploitation tradeoff for a multi-armed bandit problem, where the reward probabilities undergo random shocks. We show that their analysis suffers two shortcomings: it assumes that learning is based on stale evidence, and it overlooks the steady state. We let the learning rule endogenously discard stale evidence, and we perform the long run analyses. The comparative study demonstrates that some of their conclusions must be qualified.

Keywords: Dynamic Environment; Learning Model; Turbulence Level; Search Intensity; Bandit Problem (search for similar items in EconPapers)
Date: 2014
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Working Paper: Pack light on the move: Exploitation and exploration in a dynamic environment (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnechp:978-3-319-00912-4_16

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DOI: 10.1007/978-3-319-00912-4_16

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