Experimentation, full revelation and inspiration and collapse
Rauh, Michael T. and Seccia, Giulio (2005) Experimentation, full revelation and inspiration and collapse. Journal of Economics Behaviour and Organization, 56, (2), 239-262. (doi:10.1016/j.jebo.2003.04.007).
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We consider a simple two-period experimentation model and explore some comparative statics implications of failures in the monotone likelihood ratio property (MLRP). A canonical example of a non-MLRP noise density is a U-shaped density on a bounded interval. In that case, the optimal first period action and information at the optimum are non-monotonic in the volatility of noise. Furthermore, there may be discontinuities in the optimal action with respect to changes in the volatility of noise and other parameters, in which the agent switches back and forth between a low, non-fully-revealing action and a high, fully-revealing action.
|Keywords:||experimentation, bounded support, learning-by-doing, monotone likelihood ratio property|
|Subjects:||H Social Sciences > HT Communities. Classes. Races
H Social Sciences > HB Economic Theory
Q Science > QC Physics
|Divisions:||University Structure - Pre August 2011 > School of Social Sciences > Economics
|Date Deposited:||15 May 2006|
|Last Modified:||27 Mar 2014 18:20|
|RDF:||RDF+N-Triples, RDF+N3, RDF+XML, Browse.|
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