Exploring a Branching Structure: A Bandit Problem with Correlated Pay-offs

Alison Hole and R Keller

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

Abstract: This paper presents a model of a search process for the best outcome of many multi-stage projects. The branching structure of the search environment is such that the pay-offs to various actions are correlated; nevertheless, it is shown that the optimal strategy is given by a simple reservation price rule. A simple model of R&D is provided as an example.

Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:cep:stitep:279

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