Strategic investment and learning with private information

Nicolas Klein and Peter Wagner
Authors registered in the RePEc Author Service: Peter Achim

Cahiers de recherche from Universite de Montreal, Departement de sciences economiques

Abstract: We study a two-player game of strategic experimentation in which agents choose the timing of investments which yield uncertain returns over time. Agents learn about future returns through privately observed signals, others’ investment decisions and from public experimentation outcomes when returns are realized. We characterize symmetric equilibria, and we relate the extent of strategic delay of investments in equilibrium to the primitives of the information structure. Agents invest without delay when the most optimistic intermediate belief exceeds a threshold. Otherwise, delay in investments induces a negative learning feed-back which may either escalate or dampen beliefs and investment choices. We highlight how private information in strategic experimentation can increase ex ante welfare because of strategic uncertainty and due to an «encouragement effect of private information»

Pages: 24 pages
Date: 2018
New Economics Papers: this item is included in nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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http://hdl.handle.net/1866/20922 (application/pdf)

Related works:
Journal Article: Strategic investment and learning with private information (2022)
Working Paper: Strategic Investment and Learning with Private Information (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:mtl:montde:2018-10

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