Announcement_paper_strategic_exp

We have a new preprint! Many products (including new medical treatments!) are heavily subsidized by regulators during development and approval. But developers respond strategically to those subsidies, and a poorly designed one can waste resources or kill the very moonshots it was meant to encourage. We study a sequential approval protocol where the regulator partially subsidizes randomized controlled trials and the developer chooses, round by round, whether to keep experimenting or walk away. We characterize the developer’s optimal strategy, and show how the regulator can subsidize them to maximize social utility. On real antibiotic data, the protocol yields >35% more social utility than one-shot randomized controlled trials.