Managing Multiple Research Projects

A decision maker can experiment on up to two alternatives simultaneously over time. One and only one of these alternatives can produce successes, according to a Poisson process with known arrival rate; but there is uncertainty as to which alternative is the profitable one. The decision maker only observes the outcomes of the alternatives chosen, and choosing each alternative entails a cost. Simultaneous experimentation involves higher costs but can produce more data. At the same time, since the alternatives are negatively correlated, the outcomes of either one are informative about the other. If the costs are high and she is sufficiently impatient, the decision maker never experiments on both alternatives at once. Otherwise, if she starts with a single alternative that produces no successes, she becomes gradually pessimistic and eventually takes on the other alternative while keeping the first one - despite the higher costs and the negative correlation.