Abstract
We analyze continuous-time games of strategic experimentation with two-armedbandits when there is no discounting. We show that for all specifications of priorbeliefs and payoff-generating processes that satisfy some separability condition, the unique symmetric Markov perfect equilibrium can be computed in a simple closed form involving only the expected current payoff of the risky arm and the expected full-information payoff, given current information. The separability condition holds in a variety of models that have been explored in the literature, all of which assume that the risky arm’s expected payoff per unit of time is time-invariant and actual payoffs are generated by a process with independent and stationary increments. The separability condition does not hold when the expected payoff per unit of time is subject to state-switching.
Dokumententyp: | Paper |
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Keywords: | Strategic Experimentation, Two-Armed Bandit, Markov-Perfect Equilibrium |
Fakultät: | Sonderforschungsbereiche > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > A8 - Strategische Erzeugung und Weitergabe von Informationen |
Themengebiete: | 300 Sozialwissenschaften > 330 Wirtschaft |
JEL Classification: | C73, D83 |
URN: | urn:nbn:de:bvb:19-epub-25311-2 |
Sprache: | Englisch |
Dokumenten ID: | 25311 |
Datum der Veröffentlichung auf Open Access LMU: | 22. Sep. 2015, 06:20 |
Letzte Änderungen: | 04. Nov. 2020, 13:06 |