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We study the hiring and retention of heterogeneous workers who learn over time. We show that the problem can be analyzed as an infinite-armed bandit with switching costs, and we apply results from Bergemann and Välimäki [Bergemann D, Välimäki J (2001) Stationary multi-choice bandit problems. J. Econom. Dynam. Control 25(10):1585–1594] to characterize the optimal hiring and retention policy. For problems with Gaussian data, we develop approximations that allow the efficient implementation of the optimal policy and the evaluation of its performance. Our numerical examples demonstrate that the value of active monitoring and screening of employees can be substantial.
learning curves, heterogeneous workers, Bayesian learning, call center, hiring and retention, operations management, Gittins index, Bandit problem
Arlotto, A., Chick, S. E., & Gans, N. F. (2014). Optimal Hiring and Retention Policies for Heterogeneous Workers Who Learn. Management Science, 60 (1), 110-129. http://dx.doi.org/10.1287/mnsc.2013.1754
Date Posted: 27 November 2017
This document has been peer reviewed.