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Behavioral biases in endogenous-timing herding games: An experimental study

Listed author(s):
  • Ivanov, Asen
  • Levin, Dan
  • Peck, James

We experimentally study behavior in an endogenous-timing herding game. We find that subjects respond to their type and to observed investment activity in a sensible way, but there are also substantial departures from Nash Equilibrium. Some departures can be viewed as mere noise in decision making while other departures represent systematic biases reflecting subjects’ failure to appreciate subtle aspects of the game.

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File URL: http://www.sciencedirect.com/science/article/pii/S0167268112002600
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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 87 (2013)
Issue (Month): C ()
Pages: 25-34

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Handle: RePEc:eee:jeborg:v:87:y:2013:i:c:p:25-34
DOI: 10.1016/j.jebo.2012.12.001
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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  1. Asen Ivanov & Dan Levin & James Peck, 2008. "Hindsight, Foresight, and Insight: An Experimental Study of a Small-Market Investment Game with Common and Private Values," Working Papers 0801, VCU School of Business, Department of Economics.
  2. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
  3. Mathias Drehmann & Jörg Oechssler & Andreas Roider, 2005. "Herding and Contrarian Behavior in Financial Markets: An Internet Experiment," American Economic Review, American Economic Association, vol. 95(5), pages 1403-1426, December.
  4. Park, Andreas & Sgroi, Daniel, 2012. "Herding, contrarianism and delay in financial market trading," European Economic Review, Elsevier, vol. 56(6), pages 1020-1037.
  5. Sgroi, D., 2000. "The Right Choice at the Right Time: a Herding Experiment in Endogenous Time," Economics Papers 2000-w15, Economics Group, Nuffield College, University of Oxford.
  6. Marco Cipriani & Antonio Guarino, 2005. "Herd Behavior in a Laboratory Financial Market," American Economic Review, American Economic Association, vol. 95(5), pages 1427-1443, December.
  7. Dale O. Stahl & Paul W. Wilson, 2010. "On Players' Models of Other Players: Theory and Experimental Evidence," Levine's Working Paper Archive 542, David K. Levine.
  8. Vincent P. Crawford & Nagore Iriberri, 2005. "Level-k Auctions: Can a Non-Equilibrium Model of Strategic Thinking Explain the Winner's Curse and Overbidding in Private-Value Auctions?," Levine's Bibliography 784828000000000604, UCLA Department of Economics.
  9. Erik Eyster & Matthew Rabin, 2005. "Cursed Equilibrium," Econometrica, Econometric Society, vol. 73(5), pages 1623-1672, 09.
  10. Avery, Christopher & Zemsky, Peter, 1998. "Multidimensional Uncertainty and Herd Behavior in Financial Markets," American Economic Review, American Economic Association, vol. 88(4), pages 724-748, September.
  11. Georg Weizsacker, 2010. "Do We Follow Others When We Should? A Simple Test of Rational Expectations," American Economic Review, American Economic Association, vol. 100(5), pages 2340-2360, December.
  12. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 85(5), pages 1313-1326, December.
  13. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
  14. Dan Levin & James Peck, 2005. "Investment Dynamics with Common and Private Values," Levine's Bibliography 666156000000000607, UCLA Department of Economics.
  15. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
  16. McKelvey, Richard D. & Palfrey, Thomas R., 1994. "Quantal Response Equilibria For Normal Form Games," Working Papers 883, California Institute of Technology, Division of the Humanities and Social Sciences.
  17. Chamley, Christophe & Gale, Douglas, 1994. "Information Revelation and Strategic Delay in a Model of Investment," Econometrica, Econometric Society, vol. 62(5), pages 1065-1085, September.
  18. Richard Mckelvey & Thomas Palfrey, 1998. "Quantal Response Equilibria for Extensive Form Games," Experimental Economics, Springer;Economic Science Association, vol. 1(1), pages 9-41, June.
  19. Anderson, Lisa R & Holt, Charles A, 1997. "Information Cascades in the Laboratory," American Economic Review, American Economic Association, vol. 87(5), pages 847-862, December.
  20. Anthony Ziegelmeyer & Kene Boun My & Jean-Christophe Vergnaud & Marc Willinger, 2006. "Strategic Delay and Rational Imitation in the Laboratory," Papers on Strategic Interaction 2005-35, Max Planck Institute of Economics, Strategic Interaction Group.
  21. Stahl, Dale II & Wilson, Paul W., 1994. "Experimental evidence on players' models of other players," Journal of Economic Behavior & Organization, Elsevier, vol. 25(3), pages 309-327, December.
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