Delays Impair Learning and Can Drive Convergence to Inefficient Strategies
Name
SSRN-id3288129.pdf
Description
Accepted version
Size
2.6 MB
Format
Adobe PDF
Checksum (MD5)
71f809a1828909ff9fde1abe49a7e1be
Author(s)
Rahmandad, Hazhir
Gary, Michael Shayne
Date Issued
2020
Journal
Organization Science
Publisher
Institute for Operations Research and the Management Sciences (INFORMS)
Citation
Rahmandad, Hazhir and Gary, Michael Shayne. 2020. "Delays Impair Learning and Can Drive Convergence to Inefficient Strategies." Organization Science.
Version
Author's final manuscript
Abstract
With so many possible choices, why do managers adopt the strategies they do? We identify delays between adopting a strategy and observing the full implications of that choice as a critical factor influencing strategic choices. Using a simulation of a service firm, we conduct two behavioral experiments to investigate how delays interact with outcome uncertainty to shape learning, strategy adaptation, and performance outcomes. Two mechanisms emerge from how different subject groups perceive, react to, and learn in the presence of delayed feedback and uncertainty. First, when multiple viable strategies exist, longer delays lead both general participants and experienced managers toward alternatives that have rapid returns. When those alternatives are suboptimal, delays may strengthen convergence to inefficient strategies. Second, delays and uncertainty may also induce learners to persist with their a priori strategies. Managers show larger confidence in their priors and thus underperform general participants when the underlying task structure diverges from those priors. Both mechanisms can undermine performance. Moreover, delays and uncertainty may reduce heterogeneity in strategies and performance in more dynamic, uncertain environments, leading to convergence as tasks grow more complex and where decision makers possess similar priors.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1287/ORSC.2020.1405
