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Flexibility, Rigidity, and Competitive Experimentation

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Abstract
We study a framework in which agents can generate signals to increase their expected productivity. Such signals can be generated in heterogeneous environments: a flexible system in which the agent can freely allocate effort across different tasks, and a rigid system in which the agent must devote effort to all tasks. We provide sufficient and necessary conditions for optimal experimentation in each system. Experimentation is less likely if the agent has high bargaining power. Competition within the Flexible system makes specialization more likely. When agents from different systems compete, there is a unique equilibrium where both agents experiment if the Rigid System is restrictive enough.

Suggested Citation

  • Luca Picariello & Alexander Rodivilov, 2024. "Flexibility, Rigidity, and Competitive Experimentation," CSEF Working Papers 724, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    • Handle: RePEc:sef:csefwp:724
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    More about this item

    Keywords

    Career Concerns; Experimentation; Learning.;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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