On games of strategic experimentation

- We study a class of two-player strategic experimentation games.
- The equilibrium amount of experimentation depends on the extent to which experimentation outcomes are publicly observed and correlated.
- When experimentation outcomes are public, the game is basically one with strategic complementarities.
- When experimentation decisions are public, but outcomes are private, the strategic interaction is much more complex.
- The main finding is that there is no value in observing the other playerʼs experimentation decisions, unless outcomes are observed as well.

We study a class of symmetric strategic experimentation games. Each of two players faces an (exponential) two-armed bandit problem, and must decide when to stop experimenting with the risky arm. The equilibrium amount of experimentation depends on the degree to which experimentation outcomes are observed, and on the correlation between the two individual bandit problems. When experimentation outcomes are public, the game is basically one of strategic complementarities. When experimentation decisions are public, but outcomes are private, the strategic interaction is more complex. We fully characterize the equilibrium behavior in both informational setups, leading to a clear comparison between the two. In particular, equilibrium payoffs are higher when equilibrium outcomes are public.