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Clock Games: Theory and Experiments

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  • Brunnermeier, Markus K
  • Morgan, John

Abstract

Timing is crucial in situations ranging from product introductions, to currency attacks, to starting a revolution. These settings share the feature that payoffs depend critically on the timing of moves of a few other key players—and these are uncertain. To capture this, we introduce the notion of clock games and experimentally test them. Each player’s clock starts on 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) equilibrium is always characterized by strategic delay—regardless of whether moves are observable or not; (ii) delay decreases as clocks become more synchronized and increases as information becomes more concentrated; (iii) When moves are observable, players “herd†immediately after any player makes a move. We then show, in a series of experiments, that key predictions of the model are consistent with observed behavior.

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Bibliographic Info

Paper provided by Competition Policy Center, Institute for Business and Economic Research, UC Berkeley in its series Competition Policy Center, Working Paper Series with number qt9c11m09n.

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Date of creation: 03 Oct 2006
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Handle: RePEc:cdl:compol:qt9c11m09n

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Keywords: Clock games; experiments; currency attacks; bubbles; political revolution;

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