Experimentation, Learning, and Preemption

58 Pages Posted: 28 Jan 2019 Last revised: 11 Feb 2021

See all articles by Heidrun C. Hoppe-Wewetzer

Heidrun C. Hoppe-Wewetzer

University of Hannover - Department of Economics; and CEPR

Georgios Katsenos

University of Hannover - Department of Economics

Emre Ozdenoren

London Business School; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2019

Abstract

This paper offers a model of experimentation and learning with uncertain outcomes as suggested by Arrow (1969). Investigating a two-player stopping game, we show that competition leads to less experimentation, which extends existing results for preemption games to the context of experimentation with uncertain outcomes. Furthermore, we inquire about the extent of experimentation under two information settings: when the researchers share information about the outcomes of their experiments and when they do not share such information. We discover that the sharing of information can generate more experimentation and higher value for a relatively wide range of parameters. We trace this finding to the stronger ability to coordinate on the information obtained through experimentation when it is shared. Our model allows to shed light on recent criticism of the current scientific system.

JEL Classification: D83, O31

Suggested Citation

Hoppe-Wewetzer, Heidrun C. and Katsenos, Georgios and Ozdenoren, Emre, Experimentation, Learning, and Preemption (January 2019). CEPR Discussion Paper No. DP13483, Available at SSRN: https://ssrn.com/abstract=3324218

Heidrun C. Hoppe-Wewetzer (Contact Author)

University of Hannover - Department of Economics; and CEPR ( email )

Koenigsworther Platz 1
30167 Hannover
Germany

HOME PAGE: http://www.mik.uni-hannover.de

Georgios Katsenos

University of Hannover - Department of Economics ( email )

Koenigsworther Platz 1
Hannover, 30167
Germany

Emre Ozdenoren

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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