Effects of feedback delay on learning

Understanding barriers to organizational learning is central to understanding firm performance. We investigate the role of time delays between taking an action and observing the results in impeding learning. These delays, ubiquitous in real-world settings, are relevant to tradeoffs between long term and short term. We build four learning heuristics, with different levels of complexity and rationality, and analyze their performance in a simple resource allocation task. All reliably converge to the optimal solution when there are no/short delays, and when those delays are correctly assessed. However, learning is slowed significantly when decision makers err in assessing the length of the delay. in many cases, the decision maker never finds the optimal solution, wandering in the action space or converging to a suboptimal allocation. Results are robust to the organization's level of rationality. The proposed heuristics can be applied to a range of problems for modeling learning from experience in the presence of delays. Copyright (C) 2009 John Wiley & Sons, Ltd.