IDEAS home Printed from https://ideas.repec.org/a/the/publsh/5452.html
   My bibliography  Save this article

Gradual learning from incremental actions

Author

Listed:
  • Laiho, Tuomas

    (Department of Economics, Aalto University School of Business and Ministry of Finance, Finland)

  • Murto, Pauli

    (Department of Economics, Aalto University School of Business and Helsinki Graduate School of Economics)

  • Salmi, Julia

    (Department of Finance and Economics, Hanken School of Economics and Helsinki Graduate School of Economics)

Abstract

We introduce a collective experimentation problem where a continuum of agents choose the timing of irreversible actions under uncertainty and where public feedback from the actions arrives gradually over time. The leading application is the adoption of new technologies. The socially optimal expansion path entails an informational trade-off where acting today speeds up learning but postponing capitalizes on the option value of waiting. We contrast the social optimum to the decentralized equilibrium where agents ignore the social value of information they generate. We show that the equilibrium can be obtained by assuming that agents ignore the future actions of other agents, which lets us recast the complicated two-dimensional problem as a series of one-dimensional problems.

Suggested Citation

  • Laiho, Tuomas & Murto, Pauli & Salmi, Julia, 2025. "Gradual learning from incremental actions," Theoretical Economics, Econometric Society, vol. 20(1), January.
    • Handle: RePEc:the:publsh:5452
    as

    Download full text from publisher

    File URL: http://econtheory.org/ojs/index.php/te/article/viewFile/20250093/41156/1263
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Godfrey Keller & Sven Rady & Martin Cripps, 2005. "Strategic Experimentation with Exponential Bandits," Econometrica, Econometric Society, vol. 73(1), pages 39-68, January.
    2. Chamley, Christophe & Gale, Douglas, 1994. "Information Revelation and Strategic Delay in a Model of Investment," Econometrica, Econometric Society, vol. 62(5), pages 1065-1085, September.
    3. Munshi, Kaivan, 2004. "Social learning in a heterogeneous population: technology diffusion in the Indian Green Revolution," Journal of Development Economics, Elsevier, vol. 73(1), pages 185-213, February.
    Full references (including those not matched with items on IDEAS)

    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. 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.
    2. Wagner, Peter A. & Klein, Nicolas, 2022. "Strategic investment and learning with private information," Journal of Economic Theory, Elsevier, vol. 204(C).
    3. Daron Acemoglu & Munther A. Dahleh & Ilan Lobel & Asuman Ozdaglar, 2011. "Bayesian Learning in Social Networks," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(4), pages 1201-1236.
    4. Osnat Zohar, 2019. "Boom-Bust Cycles of Learning, Investment and Disagreement," Bank of Israel Working Papers 2019.06, Bank of Israel.
    5. Camargo, Braz, 2014. "Learning in society," Games and Economic Behavior, Elsevier, vol. 87(C), pages 381-396.
    6. Wagner, Peter A., 2018. "Who goes first? Strategic delay under information asymmetry," Theoretical Economics, Econometric Society, vol. 13(1), January.
    7. Bloch, Francis & Fabrizi, Simona & Lippert, Steffen, 2022. "Hiding and herding in market entry," Journal of Economic Theory, Elsevier, vol. 206(C).
    8. Gustavo Manso & Farzad Pourbabaee, 2022. "The Impact of Connectivity on the Production and Diffusion of Knowledge," Papers 2202.00729, arXiv.org.
    9. Dinah Rosenberg & Eilon Solan & Nicolas Vieille, 2007. "Social Learning in One-Arm Bandit Problems," Econometrica, Econometric Society, vol. 75(6), pages 1591-1611, November.
    10. Barbos, Andrei, 2013. "De-synchronized clocks in preemption games with risky prospects," Mathematical Social Sciences, Elsevier, vol. 65(3), pages 203-216.
    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. Rose Cunningham, 2004. "Investment, Private Information and Social Learning: A Case Study of the Semiconductor Industry," Macroeconomics 0409021, University Library of Munich, Germany.
    13. Wagner, Peter, 2015. "Who goes first? Strategic Delay and Learning by Waiting," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 500, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    14. Moscarini, Giuseppe & Squintani, Francesco, 2010. "Competitive experimentation with private information: The survivor's curse," Journal of Economic Theory, Elsevier, vol. 145(2), pages 639-660, March.
    15. Dinah Rosenberg & Eilon Solan & Nicolas Vieille, 2004. "Timing Games with Informational Externalities," Levine's Working Paper Archive 122247000000000704, David K. Levine.
    16. Margaria, Chiara, 2020. "Learning and payoff externalities in an investment game," Games and Economic Behavior, Elsevier, vol. 119(C), pages 234-250.
    17. Andrei Barbos, 2015. "Information Acquisition and Innovation under Competitive Pressure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(2), pages 325-347, June.
    18. 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).
    19. Bonatti, Alessandro & Hörner, Johannes, 2017. "Learning to disagree in a game of experimentation," Journal of Economic Theory, Elsevier, vol. 169(C), pages 234-269.
    20. Mekonnen, Daniel Ayalew & Gerber, Nicolas & Matz, Julia Anna, 2018. "Gendered Social Networks, Agricultural Innovations, and Farm Productivity in Ethiopia," World Development, Elsevier, vol. 105(C), pages 321-335.

    More about this item

    Keywords

    Social learning; experimentation; optimal stopping; technology adoption;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • 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:the:publsh:5452. 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: Martin J. Osborne (email available below). General contact details of provider: http://econtheory.org .

    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.