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Retaining Capable New Employees: Role of Strategic Interaction and the Learning Rate

Yoo, OS; Kwon, HD; (2016) Retaining Capable New Employees: Role of Strategic Interaction and the Learning Rate. Presented at: INFORMS Annual meeting, Nashville, TN USA.

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Abstract

We study a two-sided game involving a firm and a newly hired employee whose capability is not initially known to either party. As the employee performs, both players learn and are presented with an option: the firm can terminate an incapable employee, and a capable employee can leave the firm for greater financial remuneration elsewhere. We examine the Markov perfect equilibrium (MPE) termination strategies and payoffs that unfold. We report a counterintuitive result: slower learning can increase the equilibrium payoff for both parties. Our result identifies a nonfinancial way for firms to improve retention of highly capable employees and create a win-win situation for both parties.

Type: Conference item (Presentation)
Title: Retaining Capable New Employees: Role of Strategic Interaction and the Learning Rate
Event: INFORMS Annual meeting
Location: Nashville, TN USA
Dates: 13 November 2016 - 16 November 2016
UCL classification: UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > UCL School of Management
URI: http://discovery.ucl.ac.uk/id/eprint/10038085
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