Events

(joint with Johannes Hörner and Nicolas Klein)

Abstract: This talk presents a continuous-time game of strategic experimentation with two-armed bandits in which payoffs on the risky arm are generated by a compound Poisson process with a state-dependent distribution of jump sizes, but a state-independent arrival rate. Learning about the unknown state thus occurs at the random jump times of the process, but not in between (“no news is no news”). We allow for an arbitrary finite number of states. Using the elementary Bayes rule and the iteration of simple operators on the space of bounded functions on the belief simplex, we establish the existence of a unique symmetric Markov perfect equilibrium. We show that this equilibrium exhibits free-riding, and we identify the conditions under which it involves more experimentation than the single-agent optimum.

The Economic Theory Lunchtime Workshops are convened by Meg Meyer.