The effect of endogenous timing on coordination under asymmetric information: An experimental study
AbstractThis paper investigates the role of endogenous timing of decisions on coordination under asymmetric information. In the equilibrium of a global coordination game, where players choose the timing of their decision, a player who has sufficiently high beliefs about the state of the economy undertakes an investment without delay. This decision (potentially) triggers an investment by the other player whose beliefs would have led to inaction otherwise. Endogenous timing has two distinct effects on coordination: a learning effect (early decisions reveal information) and a complementarity effect (early decisions eliminate strategic uncertainty for late movers). The experiments that we conduct to test these theoretical results show that the learning effect of timing has more impact on the subjects' behavior than the complementarity effect. We also observe that subjects' welfare improves significantly under endogenous timing.
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Bibliographic InfoArticle provided by Elsevier in its journal Games and Economic Behavior.
Volume (Year): 86 (2014)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/inca/622836
Coordination; Delay; Information; Global games; Experiment;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
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