Pack light on the move: Exploitation and exploration in a dynamic environment

Marco LiCalzi and Davide Marchiori ()
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Davide Marchiori: Department of Management, Università Ca' Foscari Venezia

No 4, Working Papers from Venice School of Management - Department of Management, Università Ca' Foscari Venezia

Abstract: This paper revisits a recent study by Posen and Levinthal (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: adaptation; learning; turbulence; multi-armed bandit problem (search for similar items in EconPapers)
JEL-codes: D83 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2013-04
New Economics Papers: this item is included in nep-mic
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http://virgo.unive.it/wpideas/storage/2013wp4.pdf First version, 2013 (application/pdf)
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Related works:
Chapter: Pack Light on the Move: Exploitation and Exploration in a Dynamic Environment (2014)
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