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Cover von: Rewarding Successes Discourages Experimentation
Kimiko Terai, Amihai Glazer

Rewarding Successes Discourages Experimentation

Rubrik: Articles
Jahrgang 73 (2017) / Heft 4, S. 361-381 (21)
Publiziert 09.07.2018
DOI 10.1628/001522117X15006332556852
Veröffentlicht auf Englisch.
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Consider a principal who allocates a fixed budget among risk-averse agents. Each agent first chooses a policy or project. After observing the outcomes of their choices, the principal allocates a larger budget to the agents who had adopted the policy with the superior outcome. A subgame perfect Nash equilibrium may have all agents make the same choice, though the principal would prefer that they experiment. If the number of agents is large, or if the principal commits to reducing the aggregate budget when no agent had the superior outcome, or if he commits to avoid funding a riskless policy, different agents can be induced to adopt different policies.