Our experimental task is adapted from Ederer & Manso (2013). Subjects solve a task in which
they are facing a trade-off between exploration and exploitation: Participants manage a virtual
lemonade stand. Over 20 experimental periods, participants decide on multiple parameters
such as the recipe of the lemonade (sugar and lemonade content as well as color), the location
of the lemonade stand and the price of a cup of lemonade. The possible combinations of these
choice variables amounts to 23’522’994 combinations
. Participants are compensated accord-
ing to the realized profits. Thus, participants aim is to maximize the profit of the lemonade
stand, and with it, their own earnings. Participants do not know the profits associated with
each of the available choices. Participants receive a default strategy, i.e. the choices and the
associated profit of a fictitious previous manager. The default strategy is not the
most profitable strategy.
After each period, participants learn the profit for the implemented choices. Also, they
receive a brief customer feedback, implemented by having the computer randomly select one
of the three continuous choice variables (price, lemon or sugar content) to provide a binary
feedback. Consequently, the feedback is only informative for the location in which the subject
chose to sell in the current period.
The task is characterized by an exploration-exploitation trade-off with two main behaviors:
either fine-tuning the default strategy and yielding a profit similar to the previous manager
(exploitation), or experimenting with new strategies and taking the associated risk of failure
but also the chance of success (exploration). Parameters are designed in way that exploration
will increase chances to identify the strategy that leads to the global maximum while exploita-
tion rather leads to local maxima. The parameters to calculate the profits of the lemonade
stand are one-to-one adapted from Ederer & Manso (2013).
The payoff is determined by a standard pay-for-performance incentive scheme: participants
are paid 50% of the profits they make during all the 20 periods.
Then, we implement the treatments as describe in the intervention section.
After the lemonade stand task, we elicit the following individual characteristics
through a survey: demographics, risk preferences (Falk et al. 2018) and Big-5 (Lang et al.