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

Zeyu He

Papers from arXiv.org

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.

Date: 2025-11
New Economics Papers: this item is included in nep-ict and nep-mic
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