DP10854 The Benefits of Forced Experimentation: Striking Evidence from the London Underground Network

Author(s): Shaun Larcom, Ferdinand Rauch, Tim Willems
Publication Date: September 2015
Keyword(s): experimentation, learning, optimization, rationality, search
JEL(s): D83, L91, R41
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=10854

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 behavior. 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 behavior. Instead, individuals seem to under-experiment in normal times, as a result of which constraints can be welfare-improving.