IDEAS home Printed from https://ideas.repec.org/a/aea/aejmic/v13y2021i1p1-82.html
   My bibliography  Save this article

Strategic Experimentation with Congestion

Author

Listed:
  • Caroline D. Thomas

Abstract

This paper considers a two-player game of strategic experimentation with competition. Each agent faces a two-armed bandit problem where she continually chooses between her private, risky arm and a common, safe arm. Each agent has exclusive access to her private arm. However, the common arm can only be activated by one agent at a time. This congestion creates negative payoff externalities. Our main finding is that congestion gives rise to new strategic considerations: players perceive a strategic option value from occupying the common arm, making it more attractive than in the absence of competition or when switching is irreversible.

Suggested Citation

  • Caroline D. Thomas, 2021. "Strategic Experimentation with Congestion," American Economic Journal: Microeconomics, American Economic Association, vol. 13(1), pages 1-82, February.
    • Handle: RePEc:aea:aejmic:v:13:y:2021:i:1:p:1-82
    DOI: 10.1257/mic.20170187
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/mic.20170187
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/mic.20170187.ds
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    File URL: https://libkey.io/10.1257/mic.20170187?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Miller, Robert A, 1984. "Job Matching and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1086-1120, December.
    2. Nicolas Klein & Sven Rady, 2011. "Negatively Correlated Bandits," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(2), pages 693-732.
    3. Heidhues, Paul & Rady, Sven & Strack, Philipp, 2015. "Strategic experimentation with private payoffs," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 531-551.
    4. Caroline D. Thomas, 2021. "Strategic Experimentation with Congestion," American Economic Journal: Microeconomics, American Economic Association, vol. 13(1), pages 1-82, February.
    5. Godfrey Keller & Sven Rady & Martin Cripps, 2005. "Strategic Experimentation with Exponential Bandits," Econometrica, Econometric Society, vol. 73(1), pages 39-68, January.
    6. Dinah Rosenberg & Eilon Solan & Nicolas Vieille, 2007. "Social Learning in One-Arm Bandit Problems," Econometrica, Econometric Society, vol. 75(6), pages 1591-1611, November.
    7. Bruno Strulovici, 2010. "Learning While Voting: Determinants of Collective Experimentation," Econometrica, Econometric Society, vol. 78(3), pages 933-971, May.
    8. Camargo, Bráz Ministério de & Pastorino, Elena, 2010. "Learning-by-employing: the value of commitment," Textos para discussão 219, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    9. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-990, October.
    10. Paulo Barelli & Srihari Govindan & Robert Wilson, 2014. "Competition for a Majority," Econometrica, Econometric Society, vol. 82(1), pages 271-314, January.
    11. Laffond, Gilbert & Laslier, Jean Francois & Le Breton, Michel, 1994. "Social-Choice Mediators," American Economic Review, American Economic Association, vol. 84(2), pages 448-453, May.
    12. Brian Roberson, 2006. "The Colonel Blotto game," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(1), pages 1-24, September.
    13. Drew Fudenberg & Jean Tirole, 1985. "Preemption and Rent Equalization in the Adoption of New Technology," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(3), pages 383-401.
    14. Kvasov, Dmitriy, 2007. "Contests with limited resources," Journal of Economic Theory, Elsevier, vol. 136(1), pages 738-748, September.
    15. Randall G. Chapman & Kristian S. Palda, 1984. "Assessing the Influence of Campaign Expenditures on Voting Behavior with a Comprehensive Electoral Market Model," Marketing Science, INFORMS, vol. 3(3), pages 207-226.
    16. Szentes, Balazs & Rosenthal, Robert W., 2003. "Three-object two-bidder simultaneous auctions: chopsticks and tetrahedra," Games and Economic Behavior, Elsevier, vol. 44(1), pages 114-133, July.
    17. Jean-FranÚois Laslier, 2000. "Interpretation of electoral mixed strategies," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 17(2), pages 283-292.
    18. Pauli Murto & Juuso Välimäki, 2011. "Learning and Information Aggregation in an Exit Game," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(4), pages 1426-1461.
    19. Laslier, Jean-Francois & Picard, Nathalie, 2002. "Distributive Politics and Electoral Competition," Journal of Economic Theory, Elsevier, vol. 103(1), pages 106-130, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Caroline D. Thomas, 2021. "Strategic Experimentation with Congestion," American Economic Journal: Microeconomics, American Economic Association, vol. 13(1), pages 1-82, February.
    2. Noda, Shunya, 2022. "Strategic experimentation with random serial dictatorship," Games and Economic Behavior, Elsevier, vol. 133(C), pages 115-125.
    3. Atal, Vidya & Bar, Talia & Gordon, Sidartha, 2016. "Project selection: Commitment and competition," Games and Economic Behavior, Elsevier, vol. 96(C), pages 30-48.
    4. Das, Kaustav & Klein, Nicolas & Schmid, Katharina, 2024. "Strategic experimentation with asymmetric safe options," Economics Letters, Elsevier, vol. 239(C).
    5. Quitz'e Valenzuela-Stookey, 2020. "Screening and Information-Sharing Externalities," Papers 2011.04013, arXiv.org.
    6. Heidhues, Paul & Rady, Sven & Strack, Philipp, 2015. "Strategic experimentation with private payoffs," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 531-551.
    7. Cripps, Martin W. & Thomas, Caroline D., 2019. "Strategic experimentation in queues," Theoretical Economics, Econometric Society, vol. 14(2), May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Caroline Thomas, 2018. "N-dimensional Blotto game with heterogeneous battlefield values," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(3), pages 509-544, May.
    2. Chen, Chia-Hui & Ishida, Junichiro & Mukherjee, Arijit, 2023. "Pioneer, early follower or late entrant: Entry dynamics with learning and market competition," European Economic Review, Elsevier, vol. 152(C).
    3. Heidhues, Paul & Rady, Sven & Strack, Philipp, 2015. "Strategic experimentation with private payoffs," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 531-551.
    4. Johannes Hoelzemann & Nicolas Klein, 2021. "Bandits in the lab," Quantitative Economics, Econometric Society, vol. 12(3), pages 1021-1051, July.
    5. Dan Kovenock & Brian Roberson, 2021. "Generalizations of the General Lotto and Colonel Blotto games," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(3), pages 997-1032, April.
    6. Kaustav Das & Nicolas Klein & Katharina Schmid, 2020. "Strategic experimentation with asymmetric players," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 69(4), pages 1147-1175, June.
    7. Mira Frick & Yuhta Ishii, 2015. "Innovation Adoption by Forward-Looking Social Learners," Cowles Foundation Discussion Papers 1877, Cowles Foundation for Research in Economics, Yale University.
    8. Caroline D. Thomas, 2009. "N-Dimensional Blotto Game with Asymmetric Battlefield Values," Department of Economics Working Papers 130116, The University of Texas at Austin, Department of Economics, revised Dec 2016.
    9. Thomas, Caroline, 2019. "Experimentation with reputation concerns – Dynamic signalling with changing types," Journal of Economic Theory, Elsevier, vol. 179(C), pages 366-415.
    10. Doruk Cetemen & Can Urgun & Leeat Yariv, 2023. "Collective Progress: Dynamics of Exit Waves," Journal of Political Economy, University of Chicago Press, vol. 131(9), pages 2402-2450.
    11. Francis Bloch & Simona Fabrizi & Steffen Lippert, 2015. "Learning and collusion in new markets with uncertain entry costs," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 58(2), pages 273-303, February.
    12. Can Urgun, 2021. "Restless Contracting," Working Papers 2021-88, Princeton University. Economics Department..
    13. Fudenberg, Drew & He, Kevin, 2021. "Player-compatible learning and player-compatible equilibrium," Journal of Economic Theory, Elsevier, vol. 194(C).
    14. Keller, Godfrey & Rady, Sven, 2015. "Breakdowns," Theoretical Economics, Econometric Society, vol. 10(1), January.
    15. Deck, Cary & Hao, Li & Porter, David, 2015. "Do prediction markets aid defenders in a weak-link contest?," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 248-258.
    16. Wagner, Peter A. & Klein, Nicolas, 2022. "Strategic investment and learning with private information," Journal of Economic Theory, Elsevier, vol. 204(C).
    17. Simina Br^anzei & Yuval Peres, 2019. "Multiplayer Bandit Learning, from Competition to Cooperation," Papers 1908.01135, arXiv.org, revised Jan 2024.
    18. Chen, Chia-Hui & Ishida, Junichiro, 2018. "Hierarchical experimentation," Journal of Economic Theory, Elsevier, vol. 177(C), pages 365-404.
    19. Anbarci, Nejat & Cingiz, Kutay & Ismail, Mehmet S., 2023. "Proportional resource allocation in dynamic n-player Blotto games," Mathematical Social Sciences, Elsevier, vol. 125(C), pages 94-100.
    20. Cripps, Martin W. & Thomas, Caroline D., 2019. "Strategic experimentation in queues," Theoretical Economics, Econometric Society, vol. 14(2), May.

    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aejmic:v:13:y:2021:i:1:p:1-82. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.