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On games of strategic experimentation

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Date
2013-11
Link to item file
https://hal.archives-ouvertes.fr/hal-00579613
Dewey
Microéconomie
Sujet
Strategic experimentation; Optimal stopping; Real options; Incomplete information
JEL code
D83; D82
Journal issue
Games and Economic Behavior
Volume
82
Publication date
11-2013
Article pages
31–51
Publisher
Elsevier
DOI
http://dx.doi.org/10.1016/j.geb.2013.06.006
URI
https://basepub.dauphine.fr/handle/123456789/12074
Collections
  • LEDa : Publications
Metadata
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Author
Salomon, Antoine
Vieille, Nicolas
Rosenberg, Dinah
Type
Article accepté pour publication ou publié
Abstract (EN)
We study a class of symmetric strategic experimentation games. Each of two players faces an (exponential) two-armed bandit problem, and must decide when to stop experimenting with the risky arm. The equilibrium amount of experimentation depends on the degree to which experimentation outcomes are observed, and on the correlation between the two individual bandit problems. When experimentation outcomes are public, the game is basically one of strategic complementarities. When experimentation decisions are public, but outcomes are private, the strategic interaction is more complex. We fully characterize the equilibrium behavior in both informational setups, leading to a clear comparison between the two. In particular, equilibrium payoffs are higher when equilibrium outcomes are public.

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