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An experiment of social learning with endogenous timing

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  • Boğaçhan Çelen

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  • Kyle Hyndman

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Abstract

In this paper, we experimentally investigate a social learning model with endogenous timing. Specifically, we focus on a model, in which two subjects are supposed to make a binary decision. One alternative is a safe action with a fixed payoff, while the other alternative is a risky action. The subjects can make their decisions in three stages. The safe action is reversible, but the risky action is not. A subject who delays his decision can observe the decision of the other subject in the earlier stages, and as a result, acquire more information. We show that players do delay their decisions in order to obtain more information. Furthermore, they delay especially when their private information does not particularly support the risky action. We also find evidence which suggests that risk aversion plays an important role in timing decisions, often leading to ex post inefficient outcomes. Copyright Springer-Verlag 2012

Suggested Citation

  • Boğaçhan Çelen & Kyle Hyndman, 2012. "An experiment of social learning with endogenous timing," Review of Economic Design, Springer;Society for Economic Design, vol. 16(2), pages 251-268, September.
  • Handle: RePEc:spr:reecde:v:16:y:2012:i:2:p:251-268 DOI: 10.1007/s10058-012-0127-5
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    References listed on IDEAS

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    1. Chamley,Christophe P., 2004. "Rational Herds," Cambridge Books, Cambridge University Press, number 9780521530927, December.
    2. Daniel Sgroi, 2003. "The Right Choice at the Right Time: A Herding Experiment in Endogenous Time," Experimental Economics, Springer;Economic Science Association, vol. 6(2), pages 159-180, October.
    3. Chamley, Christophe & Gale, Douglas, 1994. "Information Revelation and Strategic Delay in a Model of Investment," Econometrica, Econometric Society, pages 1065-1085.
    4. Bogaçhan Çelen & Shachar Kariv, 2004. "Distinguishing Informational Cascades from Herd Behavior in the Laboratory," American Economic Review, American Economic Association, pages 484-498.
    5. Gul, Faruk & Lundholm, Russell, 1995. "Endogenous Timing and the Clustering of Agents' Decisions," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 1039-1066, October.
    6. Chamley,Christophe P., 2004. "Rational Herds," Cambridge Books, Cambridge University Press, number 9780521824019, December.
    7. Brindisi, Francesco & Çelen, Boğaçhan & Hyndman, Kyle, 2014. "The effect of endogenous timing on coordination under asymmetric information: An experimental study," Games and Economic Behavior, Elsevier, vol. 86(C), pages 264-281.
    8. 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, pages 992-1026.
    9. Anderson, Lisa R & Holt, Charles A, 1997. "Information Cascades in the Laboratory," American Economic Review, American Economic Association, pages 847-862.
    10. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
    11. 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.
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    Cited by:

    1. repec:spr:jeicoo:v:12:y:2017:i:1:d:10.1007_s11403-015-0156-6 is not listed on IDEAS
    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.

    More about this item

    Keywords

    Delay; Information; Experiment; C72; C91; D82; D83;

    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
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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