Understanding Managers’ Trade-Offs Between Exploration and Exploitation

Managers frequently explore new strategies, and exploit familiar ones, when making decisions on new product development, pricing, or advertising. Exploring for too long, or exploiting too soon, will generate inferior financial returns. Our research describes decision makers’ exploration/exploitation trade-offs and their link to psychometric traits. We conduct an incentive-aligned study in which subjects play a multiarmed bandit experiment and...