Search on Rugged Landscapes: An Experimental Study

40 Pages Posted: 20 Nov 2010 Last revised: 7 May 2013

See all articles by Stephan Billinger

Stephan Billinger

University of Southern Denmark - Department of Marketing & Management

Nils Stieglitz

Frankfurt School of Finance & Management; University of Southern Denmark - Strategic Organization Design Unit (SOD) - Department of Marketing & Management

Terry R. Schumacher

Rose-Hulman Institute of Technology

Date Written: February 27, 2013

Abstract

This paper presents findings from a laboratory experiment on human decision-making in a complex combinatorial task. We draw on the canonical NK model to depict tasks with varying complexity and find strong evidence for a behavioral model of adaptive search. Success narrows down search to the neighborhood of the status quo, while failure promotes gradually more explorative search. Task complexity does not have a direct effect on behavior, but systematically affects the feedback conditions that guide success-induced exploitation and failure-induced exploration. The analysis also shows that human participants were prone to over-exploration, since they broke off the search for local improvements too early. We derive stylized decision rules that generate the search behavior observed in the experiment and discuss the implications of our findings for individual decision-making and organizational search.

Keywords: Search, complexity, bounded rationality, decision-making, experiment, NK model

Suggested Citation

Billinger, Stephan and Stieglitz, Nils and Schumacher, Terry R., Search on Rugged Landscapes: An Experimental Study (February 27, 2013). Available at SSRN: https://ssrn.com/abstract=1711743 or http://dx.doi.org/10.2139/ssrn.1711743

Stephan Billinger (Contact Author)

University of Southern Denmark - Department of Marketing & Management ( email )

Strategic Organization Design unit (SOD)
Campusvej 55
Odense
Denmark
+45 6550 3187 (Phone)

HOME PAGE: http://www.sam.sdu.dk/staff/sbi

Nils Stieglitz

Frankfurt School of Finance & Management

Sonnemannstra├če 9-11
Frankfurt am Main, 60314
Germany

University of Southern Denmark - Strategic Organization Design Unit (SOD) - Department of Marketing & Management ( email )

Campusvej 55
DK-5230 Odense M
Denmark

HOME PAGE: http://www.sdu.dk/sod

Terry R. Schumacher

Rose-Hulman Institute of Technology ( email )

Terre Haute, IN 47803
United States

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