Behavioral Biases, Informational Externalities, and Efficiency in Endogenous-Timing Herding Games: an Experimental Study
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 NE. 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. We explore the implications of the observed departures from NE for informational externalities and market efficiency.
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