Switching Forth and Back: Problem Solving under Time Pressure

48 Pages Posted: 6 Dec 2019

See all articles by Johannes Schneider

Johannes Schneider

Universidad Carlos III de Madrid

Christoph Wolf

Bocconi University

Date Written: November 20, 2019

Abstract

We study optimal problem solving under deadlines. An agent dynamically allocates effort between a trial-and-error approach and a structural approach. The trial-and-error approach requires only a single step but may be infeasible. The structural approach is always feasible but requires more steps. The unique optimal policy can have the switching-forth-and-back property: the agent switches back to trial and error after she left it for the structural approach. We identify three drivers of that optimal policy: costly effort, finite deadlines, and observability of intermediate progress. Our model applies to questions in organizational economics, innovation, and education.

Keywords: Dynamic Problem Solving, Exponential Bandits, Deadlines

JEL Classification: D01, D83, O31

Suggested Citation

Schneider, Johannes and Wolf, Christoph, Switching Forth and Back: Problem Solving under Time Pressure (November 20, 2019). Available at SSRN: https://ssrn.com/abstract=3490935 or http://dx.doi.org/10.2139/ssrn.3490935

Johannes Schneider

Universidad Carlos III de Madrid ( email )

Christoph Wolf (Contact Author)

Bocconi University

Milan, MI 20136
Italy

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