Common value experimentation

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• dc.contributor.author Eeckhout, Jan
• dc.contributor.author Weng, Xi
• dc.date.accessioned 2020-09-28T08:03:12Z
• dc.date.available 2020-09-28T08:03:12Z
• dc.date.issued 2015
• dc.description Includes supplementary material: online appendix for Common value experimentation, additional results
• dc.description.abstract In many economic environments, agents often continue to learn about the same underlying state variable, even if they switch action. For example, a worker's ability revealed in one job or when unemployed is informative about her productivity in another job. We analyze a general setup of experimentation with common values, and show that in addition to the well-known conditions of value matching (level) and smooth pasting (first derivative), this implies that the second derivatives of the value function must be equal whenever the agent switches action. This condition holds generally whenever the stochastic process has continuous increments. The main appeal of our approach is its applicability, which is demonstrated with two applications featuring common value experimentation: strategic pricing, and job search with switching costs.
• dc.description.sponsorship Eeckhout acknowledges support from the ERC, Grant 339186, and MINECO Grant ECO2012-36200. Weng acknowledges support from the National Natural Science Foundation of China (Grant No. 71303014) and Guanghua Leadership Institute (Grant No. 12-02).
• dc.format.mimetype application/pdf
• dc.identifier.citation Eeckhout J, Weng X. Common value experimentation. Journal of Economic Theory. 2015 Dec;160:317-39. DOI: 10.1016/j.jet.2015.10.002
• dc.identifier.doi http://dx.doi.org/10.1016/j.jet.2015.10.002
• dc.identifier.issn 0022-0531
• dc.identifier.uri http://hdl.handle.net/10230/45344
• dc.language.iso eng
• dc.publisher Elsevier
• dc.relation.ispartof Journal of Economic Theory. 2015 Dec;160:317-39. DOI: 10.1016/j.jet.2015.10.002
• dc.relation.projectID info:eu-repo/grantAgreement/EC/FP7/339186
• dc.relation.projectID info:eu-repo/grantAgreement/ES/3PN/ECO2012-36200
• dc.rights © 2015 The Authors. Published by Elsevier Inc. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/4.0/
• dc.subject.keyword Common values
• dc.subject.keyword Experimentation
• dc.subject.keyword Jump-diffusion process
• dc.title Common value experimentation
• dc.type info:eu-repo/semantics/article
• dc.type.version info:eu-repo/semantics/publishedVersion