Exploration in Teams and the Encouragement Effect: Theory and Experimental Evidence

Management Science (Forthcoming)

86 Pages Posted: 24 Oct 2019

See all articles by Emma von Essen

Emma von Essen

Uppsala University; Stockholm University

Marieke Huysentruyt

HEC Paris

Topi Miettinen

Hanken School of Economics - Helsinki Graduate School of Economics

Date Written: September 3, 2019

Abstract

This paper analyzes a two-person, two-stage model of sequential exploration, where both information and payoff externalities exist, and tests the derived hypotheses in the laboratory. We theoretically show that even when agents are self-interested and perfectly rational, the information externality induces an encouragement effect: a positive effect of first-player exploration on the optimality of the second-player exploring as well. When agents have other-regarding preferences and imperfectly optimize, the encouragement effect is strongest. The explorative nature of the game raises the expected surplus compared to a payoff equivalent public goods game. We empirically confirm our main theoretical predictions using a novel experimental paradigm. Our findings are relevant for motivating and managing groups and teams innovating not only for private but also, and especially so, for public goods.

Keywords: Experimentation, exploration game, voluntary public goods game, social innovation, sequential team innovation, open innovation, laboratory experiment

JEL Classification: C72, C91, D03, D83, O31

Suggested Citation

von Essen, Emma and Huysentruyt, Marieke and Miettinen, Topi, Exploration in Teams and the Encouragement Effect: Theory and Experimental Evidence (September 3, 2019). Management Science (Forthcoming), Available at SSRN: https://ssrn.com/abstract=3470127 or http://dx.doi.org/10.2139/ssrn.3470127

Emma Von Essen

Uppsala University ( email )

Uppsala, SE-751 26
Sweden

Stockholm University ( email )

Kyrkgatan 43B
SE-106 91 Stockholm
Sweden

Marieke Huysentruyt (Contact Author)

HEC Paris ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Topi Miettinen

Hanken School of Economics - Helsinki Graduate School of Economics ( email )

Helsinki
Finland

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