We study the experimentation dynamics of a decision maker (DM) in a two-armed bandit setup (Bolton and Harris [1999 … optimal experimentation strategy that turns out to follow a cut-off rule with respect to her belief process. The belief …

experimentation level rises in the Bellman value; and deduce testable implications, like (b) experimentation costs drift up; and (c) a … finitely many states and actions, and we also extend an R&D interpretation of the model, where experimentation is monotonic not … benefits of information: c'(n) = MB(n). In our diffusion setting, the marginal benefit of experimentation is constant, and so …

experimentation level rises in the Bellman value; and deduce testable implications, like (b) experimentation costs drift up; and (c) a … finitely many states and actions, and we also extend an R&D interpretation of the model, where experimentation is monotonic not … benefits of information: c'(n) = MB(n). In our diffusion setting, the marginal benefit of experimentation is constant, and so …