Learning and Smooth Stopping

Robin Mason and Välimäki, Juuso
Authors registered in the RePEc Author Service: Juuso Välimäki

No 6623, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We propose a simple model of optimal stopping where the economic environment changes as a result of learning. A primary application of our framework is an optimal job search problem when the worker's labour market opportunities are initially uncertain. We distinguish between two interpretations of the model. In the first, a worker learns about common market conditions, such as the number of potential employers, that affect all searchers. In the second, the worker learns about her idiosyncratic productivity distribution across firms. For the first model, we show that learning leads to higher wage demands by the workers. In the second model, we give sufficient conditions so that learning leads to higher wage demands for optimistic workers and lower demands for pessimistic workers due to learning.

Keywords: Learning; Stopping (search for similar items in EconPapers)
JEL-codes: D83 (search for similar items in EconPapers)
Date: 2008-01
New Economics Papers: this item is included in nep-lab
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