Selecting the Best: The Persistent Effects of Luck

Mikhail Drugov, Margaret Meyer and Marc Möller

No 1049, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: We analyze a model of organizational learning where agents’ performance reflects time-invariant unobservable ability, privately-chosen effort, and noise. Our main result is that, even when performance is almost entirely random, maximizing the probability of identifying the best agent (“selective efficiency”) requires biasing final selection in favor of early winners. Making luck persistent, e.g. through fast-tracks, is thus rationalized by the pursuit of selective efficiency. Agents’ strategic efforts amplify the persistence of luck. Organizational learning also affects the persistence of initial advantages stemming from identity. Identity-dependent biases, e.g. gender specific mentoring, create incentives that make selection both more efficient and more equitable.

Date: 2024-07-10
New Economics Papers: this item is included in nep-mic
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Working Paper: Selecting the Best: The Persistent Effects of Luck (2024)
Working Paper: Selecting the Best: The Persistent Effects of Luck (2024)
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