Econometrica

Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Mar, 1999, Volume 67, Issue 2

Strategic Experimentation

https://doi.org/10.1111/1468-0262.00022
p. 349-374

Patrick Bolton, Christopher Harris

This paper extends the classic two‐armed bandit problem to a many‐agent setting in which players each face the same experimentation problem. The main change from the single‐agent problem is that an agent can now learn from the current experimentation of other agents. Information is therefore a public good, and a free‐rider problem in experimentation naturally arises. More interestingly, the prospect of future experimentation by others encourages agents to increase current experimentation, in order to bring forward the time at which the extra information generated by such experimentation becomes available. The paper provides an analysis of the set of stationary Markov equilibria in terms of the free‐rider effect and the encouragement effect.


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