Clock games: Theory and experiments

Research output: Contribution to journalArticle

31 Scopus citations

Abstract

In many situations, timing is crucial-individuals face a trade-off between gains from waiting versus the risk of being preempted. To examine this, we offer a model of clock games, which we then test experimentally. Each player's clock starts upon receiving a signal about a payoff-relevant state variable. Since the timing of the signals is random, clocks are de-synchronized. A player must decide how long, if at all, to delay his move after receiving the signal. We show that (i) delay decreases as clocks become more synchronized, and (ii) when moves are observable, players "herd" immediately after any player makes a move. Our experimental results are broadly consistent with these two key predictions of the theory.

Original languageEnglish (US)
Pages (from-to)532-550
Number of pages19
JournalGames and Economic Behavior
Volume68
Issue number2
DOIs
StatePublished - Mar 2010

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Keywords

  • Bubbles
  • Clock games
  • Currency attacks
  • Experiments
  • Political revolution

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