Exploring a Branching Structure: A Bandit Problem with Correlated Pay-offs
This paper presents a model of a search process for the best outcome of many multi-stage projects. The branching structure of the search environment is such that the pay-offs to various actions are correlated; nevertheless, it is shown that the optimal strategy is given by a simple reservation price rule. A simple model of R&D is provided as an example.
Year of publication: |
1994
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Authors: | Hole, Alison ; Keller, Godfrey |
Institutions: | Suntory and Toyota International Centres for Economics and Related Disciplines, LSE |
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