Discussion paper

DP11138 Relational Knowledge Transfers

An expert with general knowledge trains a cash-constrained novice. Faster training increases the novice’s productivity and his ability to compensate the expert; it also shrinks the stock of knowledge yet to be transferred, reducing the expert’s ability to retain the novice. The pro…t-maximizing agreement is a multi-period apprenticeship in which knowledge is transferred gradually over time. The expert adopts a ¹/ₑ rule”whereby, at the beginning of the relationship, the novice is trained just enough to produce a fraction ¹/ₑ of the efficient output. This rule causes inefficiently lengthy relationships that grow longer the more patient the players. We discuss policy interventions.


Garicano, L and L Rayo (2016), ‘DP11138 Relational Knowledge Transfers‘, CEPR Discussion Paper No. 11138. CEPR Press, Paris & London. https://cepr.org/publications/dp11138