Strategic Experimentation - (Now published in 'Econometrica',(March 1999)

Patrick Bolton and Christopher Harris

STICERD - Theoretical Economics Paper Series from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE

Abstract: This paper extends the classic two-armed bandit problem to a many-agent setting in which N players each face the same experimentation problem. The difference with the single-agent problem is that agents can now learn from the experiments of others. Thus, experiementation produces a public good and a free-rider problem in experimentation naturally arises. More interestingly, future experimentation by others encourages current individual experimentation. The paper provides an analysis of the set of Markov equilibria in terms of the free-rider effect and the encouragement effect.

Date: 1993
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Persistent link: https://EconPapers.repec.org/RePEc:cep:stitep:261

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