International College of Economics and Finance

ICEF Research Seminar by Svetlana Boyarchenko (University of Texas at Austin)

On Thursday, March 16 at 4.40 pm, room 3211 (Shabolovka str. 26) ICEF held the Research Seminar.
Speaker: Svetlana Boyarchenko (University of Texas at Austin)
Theme: "Strategic Experimentation with Erlang Bandits"


Abstract: While risks related to events that arrive randomly play important role in many real life decisions, models of learning and experimentation based on twoarmed Poisson bandits remain mostly abstract theoretical models with few economic applications. We suggest a new class of models of strategic experimentation which are almost as tractable as exponential models, but incorporate such realistic features as dependence of the expected rate of news arrival on the time elapsed since the start of an experiment and judgement about the quality of a “risky” arm based on evidence of a series of trials as opposed to a single evidence of success or failure as in exponential models with conclusive experiments. We demonstrate that, unlike in the exponential models, players may stop experimentation before the first breakdown happens. Moreover, ceteris paribus, experimentation in a model with breakthroughs may last longer than experimentation in the corresponding model with breakdowns.

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