AN EXPERIMENTAL-ANALYSIS OF THE BANDIT PROBLEM

We investigate, in an experimental setting, the behavior of single dec ision makers who at discrete time intervals over an ''infinite'' horiz on may choose one action from a set of possible actions where this set is constant over time, i.e. a bandit problem. Two bandit environments an examined, one in which the predicted behavior should always be myo pic (the two-armed bandit) and the other in which the predicted behavi or should never be myopic (the one-armed bandit). We also investigate the comparative static predictions as the underlying parameters of the bandit environments are changed. The aggregate results show that the behavior in the two bandit environments are quantitatively different a nd in the direction of the theoretical predictions.