Online Appendix for Relational Knowledge Transfers

Here we show that, in the model considered in Section 5.1 in the text, Lemmas 1-2 and Proposition 1 remain valid.1 Recall that period t output is now f(Xt + xt) = f(Xt+1), while all other aspects of the model are unchanged. The novice’s outside option remains equal to 1 1−δf (Xt) . 2 Other than the modifications listed below, the proofs of Lemmas 1-2 and Proposition 1 are identical to before. (In these proofs, yt still denotes f (Xt) . Therefore, period-t output is now yt+1 = f (Xt + xt) .) Proof Lemma 1. In period k, Πk(C ′) is now equal to y′ k+1 − w′ k = ysup − w′ k = ysup + 1 r ysup − Vk (C ′) and Πk(C) is now equal to ∑∞ τ=k δ yτ+1 − Vk (C) . Therefore, as before, Πk(C ′) > Πk(C) ≥ 0 and, for all t < k,