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Learning While Experimenting

Author

Listed:
  • Ettore Damiano
  • Hao Li
  • Wing Suen

Abstract

An agent performing risky experimentation can benefit from suspending it to learn directly about the state. 'Positive' information acquisition seeks news that would confirm the state that favours experimentation. It is used as a last-ditch effort when the agent is pessimistic about the risky arm before abandoning it. 'Negative' information acquisition seeks news that would demonstrate that experimentation is futile. It is used as an insurance strategy to avoid wasteful experimentation when the agent is still optimistic. A higher reward from risky experimentation expands the region of beliefs that the agent optimally chooses information acquisition rather than experimentation.

Suggested Citation

  • Ettore Damiano & Hao Li & Wing Suen, 2020. "Learning While Experimenting," The Economic Journal, Royal Economic Society, vol. 130(625), pages 65-92.
    • Handle: RePEc:oup:econjl:v:130:y:2020:i:625:p:65-92.
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    File URL: http://hdl.handle.net/10.1093/ej/uez043
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    Cited by:

    1. Alessandro Lizzeri & Eran Shmaya & Leeat Yariv, 2024. "Disentangling Exploration from Exploitation," Papers 2404.19116, arXiv.org.
    2. Mayskaya, Tatiana, 2024. "Following beliefs or excluding the worst? The role of unfindable state in learning," European Economic Review, Elsevier, vol. 162(C).

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