2022/05/12 by Aroon Narayanan, Narayanan, Aroon
Decision Sciences · Social Sciences · #Artificial Intelligence (cs.AI) #Auction Theory and Applications #Experimental Behavioral Economics Studies #FOS: Computer and information sciences #FOS: Economics and business #Game Theory and Applications #Machine Learning (cs.LG) #Theoretical Economics (econ.TH)
paper · pdf · doi:10.48550/arxiv.2205.06107
openalex publication_date 2022/05/12 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
I study a game of strategic exploration with private payoffs and public actions in a Bayesian bandit setting. In particular, I look at cascade equilibria, in which agents switch over time from the risky action to the riskless action only when they become sufficiently pessimistic. I show that these equilibria exist under some conditions and establish their salient properties. Individual exploration in these equilibria can be more or less than the single-agent level depending on whether the agents start out with a common prior or not, but the most optimistic agent always underexplores. I also show that allowing the agents to write enforceable ex-ante contracts will lead to the most ex-ante optimistic agent to buy all payoff streams, providing an explanation to the buying out of smaller start-ups by more established firms.