This paper considers a two-player game of strategic experimentation with competition. Each agent faces a two-armed bandit problem where she continually chooses between her private, risky arm and a common, safe arm. Each agent has exclusive access to her private arm. However, the common arm can only be activated by one agent at a time. This congestion creates negative payoff externalities. Our main finding is that congestion gives rise to new strategic considerations: players perceive a strategic option value from occupying the common arm, making it more attractive than in the absence of competition or when switching is irreversible.
Thomas, Caroline D.
"Strategic Experimentation with Congestion."
American Economic Journal: Microeconomics,
Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
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