Impact of Bayesian Learning and Externalities on Strategic Investment

• 成果类型: Article
• 署名作者: Kwon, H. Dharma; Xu, Wenxin; Agrawal, Anupam; Muthulingam, Suresh
• 署名单位: University of Illinois System; University of Illinois Urbana-Champaign; Texas A&M University System; Texas A&M University College Station; Mays Business School; Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2015.2156
• 发表日期: 2016
• 页码: 550-570
• 关键词: games; Group decisions; stochastic; Decision Analysis; Sequential; dynamic programming; optimal control

摘要

We investigate the interplay between learning effects and externalities in the problem of competitive investments with uncertain returns. We examine a game theoretic duopoly investment model in which (i) a firm can learn about the profitability of the investment by observing the performance of the first mover and (ii) externalities exist between the investments of two firms. We find a region of a war of attrition between the two firms in which the interplay between externalities and learning gives rise to counterintuitive effects on investment strategies and payoffs. In particular, we find that, contrary to the conventional war of attrition where an increase in benefits for the follower generally delays the first move, an increase in the rate of learning-which tends to benefit the follower-can hasten the first investment.