Hörner, Johannes, Klein, Nicolas and Rady, Sven (2020) Overcoming Free-Riding in Bandit Games. TSE Working Paper, n. 20-1132, Toulouse

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This paper considers a class of experimentation games with L´evy bandits encompassing those of Bolton and Harris (1999) and Keller, Rady and Cripps (2005). Its main result is that efficient (perfect Bayesian) equilibria exist whenever players’ payoffs have a diffusion component. Hence, the trade-offs emphasized in the literature do not rely on the intrinsic nature of bandit models but on the commonly adopted solution concept (MPE). This is not an artifact of continuous time: we prove that such equilibria arise as limits of equilibria in the discretetime game. Furthermore, it suffices to relax the solution concept to strongly symmetric equilibrium.

Item Type: Monograph (Working Paper)
Language: English
Date: August 2020
Place of Publication: Toulouse
Uncontrolled Keywords: Two-Armed Bandit, Bayesian Learning, Strategic Experimentation, Strongly Symmetric Equilibrium.
JEL Classification: C73 - Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
D83 - Search; Learning; Information and Knowledge; Communication; Belief
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 27 Aug 2020 10:16
Last Modified: 24 Aug 2022 09:59
OAI Identifier: oai:tse-fr.eu:124603
URI: https://publications.ut-capitole.fr/id/eprint/41737
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