Essays on Learning and Strategic Investment

The first chapter studies the strategic timing of irreversible investments when returns depend on an uncertain state of the world. Agents learn about the state through privately observed signals, as well as from each other's actions and experience. In this environment there is the possibility of learning feedback in which an agent's present action affects how much she can learn from the other agent's experience in the future. I characterize symmetric mixed-strategy equilibria, and show that private information mitigates free-riding and increases efficiency if the prior belief about the state is not too low, but that it may lead to inefficient over-investment otherwise. The second chapter examines the effect of trade opportunities on a seller's incentive to acquire information through experimentation. I characterize the unique equilibrium outcome, and discuss the effects of variations in the information structure on the probability of trade. The main result is that more accurate information for the buyer can reduce social welfare. Efficiency requires that the buyer offers a price that the seller always accepts and that the seller experiments when it is socially optimal to do so. When the buyer receives an informative signal about positive experimentation outcomes, the absence of such a signal can induce the buyer to purchase the good with low but known quality at a low price. If the buyer receives an informative signal about negative experimentation outcomes, the seller might not experiment so as to avoid the risk of generating an outcome that could trigger the buyer to reduce her offer. The third chapter analyzes the contracting problem of a principal who delegates research to two independently experimenting agents. The features of the optimal contract depend on the principal's preferences over the agents' successes. If successes are substitutes, the first agent to produce a success receives the greatest reward. The competition for the first success benefits the principal because it reduces the agents' incentive to delay their effort. In contrast, when successes are complements, the reward for the second success is greater which results in a second mover advantage that encourages agents to delay effort.Ph