What Directs Search? Experimental Evidence on Some Triggers of Exploration

54 Pages Posted: 7 Jun 2017 Last revised: 11 Feb 2020

See all articles by Sheen S. Levine

Sheen S. Levine

University of Texas at Dallas; Columbia University

Charlotte Reypens

University of Texas at Dallas - Department of Organizations, Strategy & International Management

Christoph Riedl

Northeastern University - D’Amore-McKim School of Business; Northeastern University - College of Computer and Information Science; Harvard University - Institute for Quantitative Social Science

Date Written: February 3, 2019

Abstract

Search is fundamental to managers and organizations, a cornerstone of the behavioral theory of the firm. But although theory and firm-level evidence rely on presumed individual mechanisms, these remain untested or are contested. Here we join the effort to uncover the micro-processes of search by identifying some conditions that encourage exploration. To do that, we design and conduct incentivized, randomized behavioral experiments, and replicate them across populations. We theorize that search can be reactive, a response to immediate negative experiences — but also proactive, guided by deliberation and anticipation. We begin by testing the prevalent assumption that exploration is a reaction to trailing aspirations. But then we demonstrate that exploration can be also prompted by stable performance (low variability). Moreover, performance stability (or variability) also interacts with the response to a negative aspiration–performance gap, seemingly changing how it is interpreted. We proceed to compare the observed human behavior to that of artificial intelligence (AI) agents. We find the populations behave similarly, starting with a broad exploratory search, which may not be immediately lucrative. The evidence, we propose, demonstrates that decision-makers can search proactively, not just in response to a failure or haphazardly. Rather, they act as if they use feedback to refine a mental model, a model that directs subsequent search.

Keywords: Exploration, exploitation, performance, feedback, individual, experiment

Suggested Citation

Levine, Sheen S. and Reypens, Charlotte and Riedl, Christoph, What Directs Search? Experimental Evidence on Some Triggers of Exploration (February 3, 2019). Available at SSRN: https://ssrn.com/abstract=2816541

Sheen S. Levine (Contact Author)

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Charlotte Reypens

University of Texas at Dallas - Department of Organizations, Strategy & International Management ( email )

800 West Campbell Road
SM 43
Richardson, TX 75080-3021
United States

Christoph Riedl

Northeastern University - D’Amore-McKim School of Business ( email )

360 Huntington Ave.
Boston, MA 02115
United States

HOME PAGE: http://www.christophriedl.net

Northeastern University - College of Computer and Information Science ( email )

360 Huntington Avenue
Boston, MA 02115
United States

Harvard University - Institute for Quantitative Social Science ( email )

1737 Cambridge St.
Cambridge, MA 02138
United States

HOME PAGE: http://christophriedl.net

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