Working Papers
Exploration, Exploitation, Amelioration: Experimentation with Endogenously Changing Arms - draft
I analyse how economic agents adapt to new risky opportunities, such as new technologies, when the agents can invest in increasing the likelihood of a successful outcome, while also learn about its original quality. I build on a single risky arm Poisson bandit environment and explore how the ability to endogenously change the arm, by investing, affects the incentives for experimentation. More specifically, I assume that successful investment turns a bad arm into a good one.
As opposed to standard good news Poisson bandits, I find that beliefs may evolve non-monotonically and that the agent may get stuck on a certain belief and invest at some intensity until the news arrives. In the context of adaptation, this means that the agent may keep pursuing the new opportunity forever despite not reaching a success for a long time, in contrast to necessarily giving up according to the traditional experimentation models. This creates discontinuity in the long-term outcomes of experimentation and suggests strong implications for innovation design and organisational strategies for technological adaptation.
Abstention as a Protest Vote - draft
I look at the strategic voting model where the citizens are influenced by election and protesting motivations. In particular, I study elections with two responsive candidates who, based on election outcome, set a two-dimensional response, which contains policies that differ in salience – a salient and a previously excluded one, upon winning. The citizens share a common but imperfectly observed preference about a better fitting candidate along the salient dimension, but are polarized in their views towards the excluded policy, which they wish to communicate through the elections (being uncertain about which view prevails in society).
I focus on a subset of symmetric equilibria and show the existence of a separating equilibrium where one of the polarized groups abstains and the other votes according to their private signal. In large elections, such equilibrium achieves full information aggregation and perfect preference transmission; however, it exists only if the population is balanced enough and if the private information precision is relatively high. Finally, I derive conditions for such outcome to be efficient. Among other, the model may shed the light on why citizens vote in imperfect (including non-democratic) political environments.