Planning Costs and the Theory of Learning by Doing

34 Pages Posted: 21 Jul 2003

See all articles by W. Bentley MacLeod

W. Bentley MacLeod

Columbia University - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: June 2003

Abstract

This paper illustrates how the explicit introduction of planning costs into a model of decision making under uncertainty can result is a theory of learning by doing that is empirically implementable. Even when not optimal, it is shown that learning by doing results in convergence to optimal choice under very general conditions. Hence, it may explain why learning by doing (or adaptive learning) is a good first order model of behavior for a wide variety of environments.

Keywords: Decision Theory, Learning by Doing, Contingent Plans, Status Quo Effects, Incomplete Contracts, Behavioral Economics

Suggested Citation

MacLeod, William Bentley, Planning Costs and the Theory of Learning by Doing (June 2003). USC CLEO Research Paper No. C03-16. Available at SSRN: https://ssrn.com/abstract=425961 or http://dx.doi.org/10.2139/ssrn.425961

William Bentley MacLeod (Contact Author)

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