Publications (in reverse chronological order):

**Strategic
Experimentation with asymmetric safe options** (with Kaustav Das and Katharina
Schmid), forthcoming in *Economics Letters*

Abstract: We study a two-player game of strategic experimentation with exponential bandits à la Keller, Rady and Cripps (2005) where the safe-arm payoff is different across players. We show that, as in Das, Klein and Schmid (2020), there exists an equilibrium in cutoff strategies if and only if the difference in safe-arm payoffs is large enough. In the equilibrium in cutoff strategies, the player with the higher safe-arm payoff conducts less experimentation. This feature of the equilibrium offers an explanation for the fact that oftentimes technological innovations are due to startups rather than established market leaders.

Do Stronger Patents Lead to Faster Innovation? The Effect of Clustered Search (with Kaustav Das), The International Economic Review, 2024, 65(2), 915-954

Abstract: We analyse a patent race between two firms choosing between an established and an innovative method. The unique Markov perfect equilibrium coincides with the cartel solution if and only if firms have the same ability of leveraging a good innovative method or there is no patent protection. Otherwise, equilibrium efforts are clustered too much in the innovative method, as compared to the cartel benchmark. The expected time to a breakthrough is minimised at an interior patent strength. Thus, a decrease in R&D productivity can go hand-in-hand with a concentration of research efforts in riskier areas and stronger patent protections.

Strategic
Investment and Learning with Private Information (with Peter Wagner), *The
Journal of Economic Theory,* 2022, 204; //doi.org/10.1016/j.jet.2022.105523

Overcoming Free-Riding
in Bandit Games *(with Johannes Hörner & Sven
Rady), The Review of Economic Studies, 2022, 89 (4), 1948–1992*

Abstract: This paper considers a class of experimentation games with Lévy bandits encompassing those of Bolton and Harris (1999) and Keller, Rady and Cripps (2005). Its main result is that efficient (perfect Bayesian) equilibria exist whenever players’ payoffs have a diffusion component. Hence, the trade-offs emphasized in the literature do not rely on the intrinsic nature of bandit models but on the commonly adopted solution concept (Markov perfect equilibrium). This is not an artifact of continuous time: we prove that efficient equilibria arise as limits of equilibria in the discrete-time game. Furthermore, it suffices to relax the solution concept to strongly symmetric equilibrium.

Bandits in the Lab *(with Johannes
Hölzemann), Quantitative Economics, 2021, 12, 1021–1051*

Abstract: We experimentally implement a dynamic public-good problem, where the public good in question is the dynamically evolving information about agents’ common state of the world. Subjects’ behavior is consistent with free-riding because of strategic concerns. We also find that subjects adopt more complex behaviors than predicted by the welfare-optimal equilibrium, such as non-cut-off behavior, lonely pioneers and frequent switches of action.

Videos illustrating the operation of the eye-tracking devices can be found on Johannes' webpage.

Strategic
Experimentation with Asymmetric Players (with Kaustav Das and Katharina
Schmid), 2020, *Economic Theory*, *69*(4), 1147-1175

**Abstract:** We examine a two-player game
with two-armed exponential bandits à la Keller, Rady, Cripps (2005), where players
operate different technologies for exploring the risky option. We characterise the set
of Markov perfect equilibria, and show that there always exists an equilibrium in which
the player with the inferior technology uses a cutoff strategy. All Markov perfect
equilibria imply the same amount of experimentation but differ with respect to the
expected speed of the resolution of uncertainty. If and only if the degree of asymmetry
between the players is high enough, there exists a Markov perfect equilibrium in which
both players use cutoff strategies. Whenever this equilibrium exists, it welfare
dominates all other equilibria. This contrasts with the case of symmetric players, where
there never exists a Markov perfect equilibrium in cutoff strategies.

Relational Contracts with Private Information on the Future Value of the Relationship: The Upside of Implicit Downsizing Costs (with Matthias Fahn), American Economic Journal: Microeconomics, 2019, 11 (4), 33-58

**Abstract: We
analyze a relational contracting problem, in which the principal has private
information about the future value of the relationship. In order to reduce bonus
payments, the principal is tempted to claim that the value of the future
relationship is lower than it actually is. To induce truth-telling, the optimal
relational contract may introduce distortions after a bad report. For some levels of
the discount factor, output is reduced by more than would be sequentially optimal.
This distortion is attenuated over time even if prospects remain bad. Our model thus
provides an alternative explanation for indirect short-run costs of
downsizing.**

Slides for the 6th Workshop on Stochastic Methods in Game Theory

Learning in a Game of Strategic Experimentation With
Three-Armed Exponential Bandits, 2018 in Frontiers of Dynamic Games (a volume
of the series *Static
& Dynamic Game Theory: Foundations & Applications),* edited L.A.
Petrosyan, V.V. Mazalov, et N.A. Zenkevich

Abstract: The present article provides some additional results for the two-player game of strategic experimentation with three-armed exponential bandits analyzed in Klein (2013). Players play replica bandits, with one safe arm and two risky arms, which are known to be of opposite types. It is initially unknown, however, which risky arm is good and which is bad. A good risky arm yields lump sums at exponentially distributed times when pulled. A bad risky arm never yields any payoff. In this article, I give a necessary and sufficient condition for the state of the world eventually to be found out with probability 1 in any Markov perfect equilibrium in which at least one player’s value function is continuously differentiable. Furthermore, I provide closed-form expressions for the players’ value function in a symmetric Markov perfect equilibrium for low and intermediate stakes.

Parliament Shapes and Sizes (with Raphaël Godefroy), Economic Inquiry, 2018, 56 (4), 2212-2233, https://doi.org/10.1111/ecin.12584

Abstract: This paper proposes a model of Parliamentary institutions in which a Parliament Designer makes three decisions: whether a Parliament should comprise one or two chambers, what the relative bargaining power of each chamber should be if the Parliament is bicameral, and how many legislators should sit in each chamber. We document empirical regularities across countries that are consistent with the predictions of our model.

[« Les Échos » que nous avons donnés à ce papier : Y a-t-il trop de parlementaires en France ?]

Will Truth Out?--An
Advisor's Quest To Appear Competent *(with Tymofiy Mylovanov), Journal of
Mathematical Economics, 2017, 72, 112-121*

**Abstract: We
study a dynamic career-concerns environment with an agent who has incentives to
appear competent. It is well known that dynamic career concerns create incentives
for an agent to be conservative and to tailor his reports towards a commonly held
prior opinion. The existing models, however, have focused on short time horizons. We
show that, for long time horizons, there exist countervailing incentives for the
agent to report his true opinion. In particular, if the agent is sufficiently
patient, the time horizon is sufficiently long given the agent's patience, and
the quality of the competent expert is high enough given the time horizon and the
discount factor, the beneficial long-term incentives overwhelm any harmful myopic
ones, and the incentive problem vanishes.**

**The Importance
of Being Honest, **Theoretical
Economics, 2016, 11: 773-811`

**Abstract:** This paper analyzes the case of
a principal who wants to provide an agent with proper incentives to explore a hypothesis
that can be either true or false. The agent can shirk, thus never proving the
hypothesis, or he can avail himself of a known technology to produce fake successes.
This latter option either makes the provision of incentives for honesty impossible or
does not distort its costs at all. In the latter case, the principal will optimally
commit to rewarding later successes even though he only cares about the first one.
Indeed, after an honest success, the agent is more optimistic about his ability to
generate further successes. This, in turn, provides incentives for the agent to be
honest before a first success.

Strategic Learning in Teams, Games and Economic Behavior, 2013, 82: 636-657

Abstract: This paper analyzes a two-player game of strategic experimentation with three-armed exponential bandits in continuous time. Players play bandits of identical types, with one arm that is safe in that it generates a known payoff, whereas the likelihood of the risky arms' yielding a positive payoff is initially unknown. When the types of the two risky arms are perfectly negatively correlated, the efficient policy is an equilibrium if and only if the stakes are high enough. If the negative correlation is imperfect and stakes are high, there exists an equilibrium that leads to efficiency for optimistic enough prior beliefs.

[An older version, which provides some additional details on certain aspects,
is **here.]**

**Negatively
Correlated Bandits** *(with Sven
Rady), The Review of Economic Studies, 2011, 78(2): 693-732.*

**Abstract: **We analyze a
two-player game of strategic experimentation with two-armed bandits. Either player has
to decide in continuous time whether to use a safe arm with a known payoff or a risky
arm whose expected payoff per unit of time is initially unknown. This payoff can be high
or low, and is negatively correlated across players. We characterize the set of all
Markov perfect equilibria in the benchmark case where the risky arms are known to be of
opposite type, and construct equilibria in cutoff strategies for arbitrary negative
correlation. All strategies and payoffs are in closed form. In marked contrast to the
case where both risky arms are of the same type, there always exists an equilibrium in
cutoff strategies, and there always exists an equilibrium exhibiting efficient long-run
patterns of learning. These results extend to a three-player game with common knowledge
that exactly one risky arm is of the high payoff type.