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Modelling Experience as Signal Accumulation

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  • Sgroi, D.

Abstract

Experience gained in a workplace characterised by decision-making and learning-by-doing is modelled via a process of signal accumulation under several different frameworks. We initially look at the probability of success based on uninterrupted signal accumulation, then consider the impact of rapid labour turnover under two alternative regimes. The first allows new workers to gain some of their predecessor’s experience through Bayesian inference on reported earlier actions. The means of information transfer between workers is therefore similar to observational learning in herding or informational cascade models. The second regime considers all experience to be lost when a worker is replaced. We see that although with valuable experience the first regime appears a much better outcome for firms, transferring some knowledge to future workers carries with it the risk of excess inertia in decision-making.

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File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/wp0205.pdf
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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0205.

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Length: 17
Date of creation: Mar 2002
Date of revision:
Handle: RePEc:cam:camdae:0205

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Web page: http://www.econ.cam.ac.uk/index.htm

Related research

Keywords: herding; private information; experience; labour turnover; excess inertia;

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  1. David Hirshleifer & Ivo Welch, 2001. "An Economic Approach to the Psychology of Change: Amnesia, Inertia, and Impulsiveness," Yale School of Management Working Papers ysm185, Yale School of Management, revised 01 Aug 2009.
  2. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
  3. Meyer, Margaret A, 1991. "Learning from Coarse Information: Biased Contests and Career Profiles," Review of Economic Studies, Wiley Blackwell, vol. 58(1), pages 15-41, January.
  4. D. Sgroi, 2001. "Controlling the Herd: Applications of Herding Theory," Cambridge Working Papers in Economics 0106, Faculty of Economics, University of Cambridge.
  5. Sgroi, D., 2000. "Optimizing Information in the Herd: Guinea Pigs, Profit and Welfare," Economics Papers 2000-w14, Economics Group, Nuffield College, University of Oxford.
  6. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
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