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Clock Games: Theory and Experiments

John Morgan

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 revolution

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Date posted: February 5, 2005  

Suggested Citation

Morgan, John and Brunnermeier, Markus K., Clock Games: Theory and Experiments (December 4, 2004). Available at SSRN: https://ssrn.com/abstract=655389 or http://dx.doi.org/10.2139/ssrn.655389

Contact Information

John Morgan (Contact Author)
University of California, Berkeley - Economic Analysis & Policy Group ( email )
Berkeley, CA 94720
United States
510-642-2669 (Phone)
810-885-5959 (Fax)
HOME PAGE: http://faculty.haas.berkeley.edu/rjmorgan/
Markus Konrad Brunnermeier
Princeton University - Department of Economics ( email )
Bendheim Center for Finance
Princeton, NJ
United States
609-258-4050 (Phone)
609-258-0771 (Fax)
HOME PAGE: http://www.princeton.edu/¡­markus

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