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Abstract:

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CEP Discussion Paper
The Benefits of Forced Experimentation: Striking Evidence from the London Underground Network
Shaun Larcom, Ferdinand Rauch and Tim Willems September 2015
Paper No' CEPDP1372:
Full Paper (pdf)

JEL Classification: D83; L91; R41


Tags: experimentation; learning; optimization; rationality; search

We estimate that a significant fraction of commuters on the London underground do not travel their optimal route. Consequently, a tube strike (which forced many commuters to experiment with new routes) taught commuters about the existence of superior journeys, bringing about lasting changes in behaviour. This effect is stronger for commuters who live in areas where the tube map is more distorted, thereby pointing towards the importance of informational imperfections. We argue that the information produced by the strike improved network-efficiency. Search costs are unlikely to explain the suboptimal behaviour. Instead, individuals seem to under-experiment in normal times, as a result of which constraints can be welfare-improving.

This paper has been published as:
'The Benefits of Forced Experimentation: Striking Evidence from the London Underground Network', Shaun Larcom, Ferdinand Rauch and Tim Willems, The Quarterly Journal of Economics, Volume 132, Issue 4, November 2017