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Strategic Delay and Rational Imitation in the Laboratory

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  • Anthony Ziegelmeyer

    ()

  • Kene Boun My
  • Jean-Christophe Vergnaud
  • Marc Willinger

Abstract

This paper investigates market failures due to strategic delays. We test experimentally a discrete model of dynamic investment, where two privately informed agents have an option to invest at the time of their choice in the presence of waiting costs. The equilibrium outcome of our experimental game is characterized by efficient imitation but complete revelation of information is time consuming. In accordance with the equilibrium solution, subjects better informed take investment decision before subjects who are less informed and subjects’ decisions exhibit rational imitation. Still, subjects do not play exactly in accordance with the equilibrium sequence and we interpret their deviations from equilibrium play as an attempt to internalize the information externalities.

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Bibliographic Info

Paper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2005-35.

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Length: 26 pages
Date of creation: May 2006
Date of revision:
Handle: RePEc:esi:discus:2005-35

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Related research

Keywords: Information Externalities; Social Learning; Strategic Delay; Experiments;

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Cited by:
  1. Park, A. & Sgroi, D., 2009. "Herding, Contrarianism and Delay in Financial Market Trading," Cambridge Working Papers in Economics 0941, Faculty of Economics, University of Cambridge.
  2. Meub, Lukas & Proeger, Till & Hüning, Hendrik, 2013. "A comparison of endogenous and exogenous timing in a social learning experiment," Center for European, Governance and Economic Development Research Discussion Papers 167, University of Goettingen, Department of Economics.
  3. Todd R. Kaplan & Bradley J. Ruffle & Ze’ev Shtudiner, 2013. "Waiting To Cooperate?," Working Papers 1314, Ben-Gurion University of the Negev, Department of Economics.
  4. Asen Ivanov & Dan Levin & James Peck, 2009. "Hindsight, Foresight, and Insight: An Experimental Study of a Small-Market Investment Game with Common and Private Values," American Economic Review, American Economic Association, vol. 99(4), pages 1484-1507, September.
  5. Asen Ivanov & Dan Levin & James Peck, 2010. "Behavioral Biases, Informational Externalities, and Efficiency in Endogenous-Timing Herding Games: an Experimental Study," Working Papers 1004, VCU School of Business, Department of Economics.

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