IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v239y2024ics016517652400226x.html
   My bibliography  Save this article

Strategic experimentation with asymmetric safe options

Author

Listed:
  • Das, Kaustav
  • Klein, Nicolas
  • Schmid, Katharina

Abstract

We study a two-player game of strategic experimentation with exponential bandits à la (Keller et al., 2005) where the safe-arm payoff is different across players. We show that, as in Das et al. (2020), there exists an equilibrium in cut-off strategies if and only if the difference in safe-arm payoffs is large enough. In the equilibrium in cutoff strategies, the player with the higher safe-arm payoff conducts less experimentation. This feature of the equilibrium offers an explanation for the fact that oftentimes technological innovations are due to startups rather than established market leaders.

Suggested Citation

  • Das, Kaustav & Klein, Nicolas & Schmid, Katharina, 2024. "Strategic experimentation with asymmetric safe options," Economics Letters, Elsevier, vol. 239(C).
    • Handle: RePEc:eee:ecolet:v:239:y:2024:i:c:s016517652400226x
    DOI: 10.1016/j.econlet.2024.111743
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S016517652400226X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2024.111743?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
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Two-armed bandit; Heterogeneous agents; Free-riding; Learning;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

    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:eee:ecolet:v:239:y:2024:i:c:s016517652400226x. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    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.