Profile
Profile

Prof. Sven Rady, PhD

Hausdorff Chair

E-mail: sven.rady(at)hcm.uni-bonn.de
Phone: +49 228 73 62080
Fax: +49 228 73 62086
Homepage: https://www.econtheory.uni-bonn.de/de/team/rady/starting-page
Institute: Department of Economics
Research Area: Research Area I (Leader)
Date of birth: 14.Oct 1962

Academic Career

1982 - 1989

Studies in mathematics and physics at the universities of Konstanz, Bonn, Paris VII (France)

1989

Diploma in Mathematics, University of Bonn

1990 - 1991

European Doctoral Program in Quantitative Economics, University of Bonn

1991 - 1995

European Doctoral Program in Quantitative Economics, London School of Economics, England, UK

1994 - 1996

Lecturer in Economics, London School of Economics, England, UK

1995

PhD in Economics, London School of Economics, England, UK

1996 - 1999

Assistant Professor of Economics, Graduate School of Business, Stanford University, CA, USA; promotion to untenured Associate Professor in 1999, on leave 1999 - 2001

1999 - 2011

Professor of Economics, LMU Munich

Since 2011

Hausdorff Chair for Mathematical Economics, University of Bonn

Research Profile

My research is concerned with the dynamics of individual decisions and the resulting equilibrium processes when economic agents are uncertain about the environment in which they operate and can learn about it through experimentation. Particularly interesting dynamics arise from informational spillovers between the agents. Examples are research teams, R&D alliances between firms, or open source projects. Generalizing classic models of optimal sequential choice of experiments, I consider multiple agents who face identical two-armed bandit problems and observe each other’s actions and payoffs. While it is natural to use the posterior belief about these characteristics as the state variable for Markov perfect equilibria ([1], [2], [3], [7]), in current work I investigate the consequences of allowing for non-Markovian behavior.

While I will continue to investigate multi-agent bandit problems in my future work, I will put stronger emphasis on payoff externalities and market interactions. Building on [3], I intend to address more general correlation structures between the characteristics of the different agents’ risky projects. Using the methods developed in [4] and [6], I plan to study experimentation with restless bandits whose characteristics change stochastically over time, so that there is an incentive to learn even in the very long run. Further research into the dynamics of two-sided market platforms with cross-group externalities will build on [8]. More broadly, I plan to investigate information aggregation in large decentralized markets where information is dispersed and participants search and learn at the same time.

Research Projects and Activities

DFG Collaborative Research Center SFB/TR 15 “Governance and the Efficiency of Economic Systems”
Project leader for two projects:

1. “Incomplete Markets, Market Interactions and Social Comparisons”, 2004 – 2011
2. “Strategic Acquisition and Transmission of Information”, 2008 - 2015

DFG Cluster of Excellence “Hausdorff Center for Mathematics”
Principal investigator and member of the Board of Directors

Contribution to Research Areas

Research Area I
The focus of my research in this area is on strategic experimentation, that is, the active production of information when there are informational spillovers between the agents. Examples are research teams, R&D alliances between firms, or open source projects. Generalizing classic models of optimal sequential choice of experiments, I consider multiple agents who face identical two-armed bandit problems in continuous time and observe each other’s actions and payoffs. One arm is safe in that it generates a known payoff per unit of time. The other arm is risky in that its payoffs are generated by a stochastic process whose characteristics are initially unknown. Using the common posterior belief about these characteristics as the natural state variable, [1] and [2] analyze Markov equilibria of an experimentation game where the type of the risky arm is the same for all players (perfect positive correlation). [3] solves a two-player game where this type is negatively correlated across players. Whether learning can be efficient in the long run turns out to depend crucially on this correlation structure. Earlier work ([4], [5], [6]) investigates Bayesian learning in dynamic pricing and trading problems with payoff externalities.

Selected Publications

[1] Godfrey Keller, Sven Rady, Martin Cripps
Strategic experimentation with exponential bandits
Econometrica , 73: (1): 39--68
2005
DOI: 10.1111/j.1468-0262.2005.00564.x
[2] Godfrey Keller, Sven Rady
Strategic experimentation with Poisson bandits
Theor. Econ. , 5: (2): 275--311
2010
DOI: 10.3982/TE595
[3] Nicolas Klein, Sven Rady
Negatively correlated bandits
Rev. Econ. Stud. , 78: (2): 693--732
2011
DOI: 10.1093/restud/rdq025
[4] Godfrey Keller, Sven Rady
Optimal experimentation in a changing environment
Rev. Econom. Stud. , 66: (3): 475--507
1999
DOI: 10.1111/1467-937X.00095
[5] Harrison Hong, Sven Rady
Strategic Trading and Learning about Liquidity
Journal of Financial Markets , 5: (4): 419--450
2002
[6] Godfrey Keller, Sven Rady
Price Dispersion and Learning in a Dynamic Differentiated-Goods Duopoly
RAND J. Econ. , 34: (1): 138--165
Publisher: JSTOR
2003
[7] Godfrey Keller, Sven Rady
Breakdowns
Theor. Econ. , 10: (1): 175--202
2015
DOI: 10.3982/TE1670
[8] Martin Peitz, Sven Rady, Piers Trepper
Experimentation in Two-Sided Markets
J. Eur. Econ. Ass. , 15: (1): 128--172
2017
[9] François Ortalo-Magné, Sven Rady
Housing market dynamics: on the contribution of income shocks and credit constraints
Rev. Econom. Stud. , 73: (2): 459--485
2006
DOI: 10.1111/j.1467-937X.2006.383_1.x
[10] Paul Heidhues, Sven Rady, Philipp Strack
Strategic experimentation with private payoffs
J. Econom. Theory , 159: (part A): 531--551
2015
DOI: 10.1016/j.jet.2015.07.017

Publication List

Editorships

• Review of Economic Studies (Associate Editor, 2000 - 2007)
• Berkeley Electronic Journals in Theoretical Economics (Associate Editor, 2006 - 2010)
• Berkeley Electronic Journals in Theoretical Economics (Co-Editor, 2010 - 2013)
• Journal of Mathematical Economics (Co-Editor, since 2013)
• Mathematics of Operations Research (Associate Editor, since 2016)

Awards

1983 - 1988

Scholarship, Studienstiftung des Deutschen Volkes

1991 - 1992

Grant for doctoral studies abroad, German Academic Exchange Service (DAAD)

1993

Research Scholarship, COLONIA Scholarship Foundation (Germany)

1993 - 1994

Graduate Fellowship, Economic and Social Research Council of the UK

1995

Participant in the Review of Economic Studies May Meeting (Brussels-London-Toulouse) with paper “Optimal Experimentation in a Changing Environment”

2005

Teaching Award of the State of Bavaria

2008 - 2010

Research Professorship at the University of Munich under the auspices of GRK 801 (10/2008 - 03/2009) and LMUexcellent (04/2009 - 09/2010)

Offers

2002

Goethe University Frankfurt

2005

University of St. Gallen, Switzerland

Selected PhD students

Markus Reisinger (2004): “Three Essays on Oligopoly: Product Bundling, Two-Sided Markets, and Vertical Product Differentiation”,
now Professor, Frankfurt School of Finance & Management

Ferdinand von Siemens (2004): “Inequity Aversion and Incentives: Three Essays in Microeconomic Theory”,
now Professor, University of Frankfurt

Nicolas Klein (2010): “Learning and Experimentation in Strategic Bandit Problems”,
now Assistant Professor, University of Montreal, QC, Canada

Supervised Theses

  • Master theses: 11
  • Diplom theses: 101
  • PhD theses: 11
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