Poissonian two-armed bandit: a new approach

We consider a new approach to the continuous-time two-armed bandit problem in which incomes are described by Poisson processes. For this purpose, first, the control horizon is divided into equal consecutive half-intervals in which the strategy remains constant, and the incomes arrive in batches corresponding to these half-intervals. For finding the optimal piecewise constant Bayesian strategy and its corresponding Bayesian risk, a recursive difference equation is derived. The existence of a limiting value of the Bayesian risk when the number of half-intervals grows infinitely is established, and a partial differential equation for finding it is derived. Second, unlike previously considered settings of this problem, we analyze the strategy as a function of the current history of the controlled process rather than of the evolution of the posterior distribution. This removes the requirement of finiteness of the set of admissible parameters, which was imposed in previous settings. Simulation shows that in order to find the Bayesian and minimax strategies and risks in practice, it is sufficient to partition the arriving incomes into 30 batches. In the case of the minimax setting, it is shown that optimal processing of arriving incomes one by one is not more efficient than optimal batch processing if the control horizon grows infinitely.