Tutorial: Exploration Vs. Exploitation

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The Exploration Versus Exploitation Tutorial

Note: in order to run the dynamic simulations referred to in this tutorial, go here, to the Java Applet version. You will be directed to download the latest version of the Java plug-in.

Organizations are constantly engaged in conflicting processes that balance flexibility and efficiency; these are exploration versus exploitation. Exploration deals with dynamic efficiency: searching for new options, experimenting, and conducting research. Exploitation deals with static efficiency: refining existing procedures, doing the same things only better, and reaping value from what is already known. Organizations with finite resources face the challenge of allocating them between these processes. James March addressed the interplay of these two factors in "Exploration and Exploitation in Organized Learning," published in Organizational Science (Vol. 2, No. 1, February 1991). This tutorial is a demonstration of several key results found in this paper. Readers wishing to gain further information should consult this influential research.

TABLE OF CONTENTS

1. Introduction
1. Exploration and Exploitation
2. The Society Model
1. Modeling and Organization
2. Learning in the Society Model
3. Observations of a Society
1. Knowledge Tends to Increase over Time
2. The Effect of Learning Rates
3. The Effect of the Initial State
4. Turnover can Contribute to Diversity
5. Turnover in the Face of Environmental Turbulence
4. Closing Remarks


5. Technical Appendix
1. Model Details

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