When Will Workers Follow an Algorithm?: A Field Experiment with a Retail Business

53 Pages Posted: 24 Apr 2018  

Kohei Kawaguchi

Department of Economics, School of Business and Management, Hong Kong University of Science and Technology

Date Written: April 6, 2018

Abstract

This paper studies if and under what conditions workers follow an algorithm, in the context of experimentation with product assortments for beverage vending machines. I develop an algorithm to automate the human task, and use simulation to show that it increases revenue. I then conduct a field experiment where I introduce the algorithm. However, it fails to increase revenue, because workers are not willing to follow it. They follow only when their opinions are integrated. Workers having more regret from the last business semester follow the algorithmic advice more, and less when their opinions are integrated.

Keywords: Automation; Experimentation; Learning; Product Assortment Problem; Multi-Armed Bandit Problem; Algorithm Aversion; Conflicts of Interest; Productivity; Retail Business; Beverage Vending Machines

JEL Classification: L20; L81; M12; M15; M20

Suggested Citation

Kawaguchi, Kohei, When Will Workers Follow an Algorithm?: A Field Experiment with a Retail Business (April 6, 2018). Available at SSRN: https://ssrn.com/abstract=3157132 or http://dx.doi.org/10.2139/ssrn.3157132

Kohei Kawaguchi (Contact Author)

Department of Economics, School of Business and Management, Hong Kong University of Science and Technology ( email )

6070 LSK Building, HKUST
Clear Water Bay
Kowloon
Hong Kong

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