Resource title

Simple models of discrete choice and their performance in bandit experiments

Resource image

image for OpenScout resource :: Simple models of discrete choice and their performance in bandit experiments

Resource description

Recent operations management papers model customers as solving multi-armed bandit problems, positing that consumers use a particular heuristic when choosing among suppliers. These papers then analyze the resulting competition among suppliers and mathematically characterize the equilibrium actions. There remains a question, however, as to whether the original customer models upon which the analyses are built are reasonable representations of actual consumer choice. In this paper, the authors empirically investigate how well these choice rules match actual performance as people solve two-armed Bernoulli bandit problems. They find that some of the most analytically tractable models perform best in tests of model fit. They also find that the expected number of consecutive trials of a given supplier is increasing and convex its expected quality level, a result that is consistent with the models' predictions, as well as with loyalty e_ects described in the popular management literature.

Resource author

Resource publisher

Resource publish date

Resource language

en

Resource content type

application/pdf

Resource resource URL

http://flora.insead.edu/fichiersti_wp/inseadwp2005/2005-48.pdf

Resource license

Copyright INSEAD. All rights reserved