Abstract
This paper offers a simple framework for studying the strategic interaction between two agents who can observe each others' actions. There is uncertainty over the payoff distribution for a certain action, which is common to both agents. The agents can gain information either by experimenting and taking the uncertain action themselves, or by observing the other agent's outcome from taking the uncertain action. The main finding is that although the combined expected payoff is maximized in the pure subgame perfect equilibria, this outcome is unlikely to arise due to conflicting preferences with respect to the equilibria. Strong incentives to free ride on the other agent's experimentation activities are therefore likely to lead to the worst possible outcome.