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.

Item Type: Article
Digital Object Identifier (DOI): doi:10.1016/j.jebo.2003.04.007
ISSNs: 0167-2681 (print)
Related URLs:
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
ePrint ID: 33411
Accepted Date and Publication Date:
Date Deposited: 15 May 2006
Last Modified: 31 Mar 2016 11:59
URI: http://eprints.soton.ac.uk/id/eprint/33411

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