Clock Games: Theory and Experiments
University of California, Berkeley - Economic Analysis & Policy Group
Markus K. Brunnermeier
Princeton University - Department of Economics
December 4, 2004
Timing is crucial in situations ranging from currency attacks, to product introductions, to starting a revolution. These settings share the feature that payoffs depend critically on the timing of a few other key players - and their moves 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.
Number of Pages in PDF File: 56
Keywords: Clock games, experiments, currency attacks, bubbles, polutical revolutionworking papers series
Date posted: February 5, 2005
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