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An experimental analysis of the bandit problem

Author

Listed:
  • Jeffrey Banks

    (Department of Economics, University of Rochester, Rochester, NY 14627, USA)

  • David Porter

    (Division of Humanities and Social Sciences, Caltech, Pasadena, CA 91125, USA)

  • Mark Olson

    (CREED, University of Amsterdam, Amsterdam, THE NETHERLANDS)

Abstract

We investigate, in an experimental setting, the behavior of single decision makers who at discrete time intervals over an "infinite" horizon may choose one action from a set of possible actions where this set is constant over time, i.e. a bandit problem. Two bandit environments are examined, one in which the predicted behavior should always be myopic (the two-armed bandit) and the other in which the predicted behavior should never be myopic (the one-armed bandit). We also investigate the comparative static predictions as the underlying parameters of the bandit environments are changed. The aggregate results show that the behavior in the two bandit environments are quantitatively different and in the direction of the theoretical predictions.

Suggested Citation

  • Jeffrey Banks & David Porter & Mark Olson, 1997. "An experimental analysis of the bandit problem," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 10(1), pages 55-77.
    • Handle: RePEc:spr:joecth:v:10:y:1997:i:1:p:55-77
    Note: Received: October, 27, 1994; revised version February 27, 1996
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    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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