Eeckhout, JanWeng, Xi2020-09-282020-09-282015Eeckhout J, Weng X. Common value experimentation. Journal of Economic Theory. 2015 Dec;160:317-39. DOI: 10.1016/j.jet.2015.10.0020022-0531http://hdl.handle.net/10230/45344Includes supplementary material: online appendix for Common value experimentation, additional resultsIn 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.application/pdfeng© 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/).info:eu-repo/semantics/articlehttp://dx.doi.org/10.1016/j.jet.2015.10.002Common valuesExperimentationJump-diffusion processinfo:eu-repo/semantics/openAccess