Learning to Disagree in a Game of Experimentation

Alessandro Bonatti and Johannes Hörner

No 1991, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We analyse strategic experimentation in which information arrives through fully revealing, publicly observable "breakdowns." With hidden actions, there exists a unique equilibrium that involves randomization over stopping times. This randomization induces belief disagreement on the equilibrium path. When actions are observable, the equilibrium is pure, and welfare improves. We analyse the role of policy interventions such as subsidies for experimentation and risk-sharing agreements. We show that the optimal risk-sharing agreement restores the first-best outcome, independent of the monitoring structure.

Keywords: Experimentation; Free-riding; Mixed strategies; Monitoring; Delay (search for similar items in EconPapers)
JEL-codes: C73 D83 O33 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2015-03
New Economics Papers: this item is included in nep-gth, nep-hpe and nep-mic
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Citations: View citations in EconPapers (4)

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Journal Article: Learning to disagree in a game of experimentation (2017)
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