Strategic Delay and Rational Imitation in the Laboratory
Kene Boun My (),
Jean-Christophe Vergnaud () and
Marc Willinger ()
Papers on Strategic Interaction from Max Planck Institute of Economics, Strategic Interaction Group
This paper investigates market failures due to strategic delays. We test experimentally a discrete model of dynamic investment, where two privately informed agents have an option to invest at the time of their choice in the presence of waiting costs. The equilibrium outcome of our experimental game is characterized by efficient imitation but complete revelation of information is time consuming. In accordance with the equilibrium solution, subjects better informed take investment decision before subjects who are less informed and subjects’ decisions exhibit rational imitation. Still, subjects do not play exactly in accordance with the equilibrium sequence and we interpret their deviations from equilibrium play as an attempt to internalize the information externalities.
Keywords: Information Externalities; Social Learning; Strategic Delay; Experiments (search for similar items in EconPapers)
JEL-codes: C91 D82 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cse, nep-exp and nep-gth
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Persistent link: https://EconPapers.repec.org/RePEc:esi:discus:2005-35
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