A Brownian motion model for decision making

This paper develops a Brownian motion model for a decision making process in which action is taken when a threshold criterion level is reached. The model is developed with reference to career mobility: it provides an explanation of an important feature of promotion processes in internal labor markets. Performance evaluation is central in this process. It is assumed that a decision maker wants to take a predetermined action when he believes that a salient attribute level equals some predetermined standard. The true attribute value is unobservable, therefore the decision maker estimates it by observing behavior, rating it, and using a time average of the performance score as his estimate of the underlying attribute. The model generates an inverse Gaussian waiting time distribution for the time until action is taken. Data on executive careers is examined and the model is found to fit the data well in comparison with the fits of alternative duration models.