Strategic Experimentation with Congestion
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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. (JEL C72, C73, D62, D83)
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1978 ◽
Vol 48
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pp. 389-390
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2020 ◽
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2020 ◽
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1974 ◽
Vol 32
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pp. 208-209
1982 ◽
Vol 40
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pp. 44-45
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1978 ◽
Vol 36
(1)
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pp. 214-215
1981 ◽
Vol 39
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pp. 494-495
1992 ◽
Vol 50
(2)
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pp. 1736-1737
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1992 ◽
Vol 50
(2)
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pp. 1314-1315
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