Exploration Is Not What It Seeks: Catalytic Exploration under Status Quo Uncertainty

2025-11-22

AI Summary

This paper examines “catalytic exploration”—rational search for alternatives expected to be rejected, undertaken solely to resolve uncertainty about the status quo. Such exploration distorts equilibria in signaling games, reverses standard preferences for information precision (favoring precision about the status quo over alternatives), and generates negative externalities. Method: We develop an options-based decomposition framework distinguishing switch value from catalytic value, integrating Bayesian signal models with game-theoretic analysis. Contributions/Results: (1) We prove that strong catalytic incentives cause collapse of separating equilibria; (2) we identify a counterintuitive “status-quo precision bias” in information acquisition, challenging rational inattention theory; (3) we show that advances in information technology may reduce social welfare by inducing excessive benchmarking. Our results demonstrate that high exploration rates can coexist with low actual switching, underscoring the profound implications of exploratory motives for information architecture and institutional design.

Technology Category

• Game Theory and Economic Paradigms: Imperfect Information
• Search and Optimization: Other Foundations of Search & Optimization
• Reasoning under Uncertainty: Sequential Decision Making

Application Category

• Economics, Online Markets and Human Computation: Incentives in network design for Web infrastructures and ecosystems
• Social Networks and Social Media: Social mining and social search on the Web
• User Modeling, Personalization and Recommendation: Attacks and countermeasures in recommendation systems

Abstract

We identify a distinct motive for search, termed catalytic exploration, where agents rationally explore alternatives they expect to reject to resolve uncertainty about the status quo. By decomposing option value into switching and catalytic components, we show that high exploration rates can coexist with bounded switching probabilities. This mechanism generates three insights. First, strong catalytic motives cause separating equilibria to collapse in signaling games as receivers explore indiscriminately. Second, agents optimally acquire more precise information about the status quo than about alternatives, reversing rational inattention intuitions. Third, catalytic exploration creates negative externalities: information technology improvements can paradoxically reduce welfare by encouraging excessive benchmarking.

Problem

• Agents explore alternatives they expect to reject
• High exploration rates coexist with bounded switching
• Catalytic exploration creates negative welfare externalities

Innovation

• Catalytic exploration resolves status quo uncertainty
• Decomposing option value into switching and catalytic components
• Agents acquire more precise status quo information than alternatives