The effect of endogenous timing on coordination under asymmetric information: An experimental study |
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| Institution: | 1. NYC Office of Management and Budget, 255 Greenwich Street, New York, NY 10007, USA;2. Melbourne Business School, 200 Leicester Street, Carlton, VIC 3053, Australia;3. Naveen Jindal School of Management, University of Texas at Dallas, 800 W. Campbell Rd (SM31), Richardson, TX 75080, USA;1. Center of Economic Research at ETH Zürich (CER-ETH), Switzerland;2. Department of Economics, Maastricht University, Netherlands;1. Google Research, 111 8th Avenue, New York, NY 10011, United States;2. Computer Science Department, Cornell University, Ithaca, NY 14853, United States;1. Universitat Autònoma de Barcelona and Barcelona GSE, Dept. Economía e Hist. Económica, UAB edifici B, E-08193 Bellaterra, Barcelona, Spain;2. Universidad Pablo Olavide, Department of Economics, Spain |
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| Abstract: | This paper investigates the role of endogenous timing of decisions on coordination under asymmetric information. In the equilibrium of a global coordination game, where players choose the timing of their decision, a player who has sufficiently high beliefs about the state of the economy undertakes an investment without delay. This decision (potentially) triggers an investment by the other player whose beliefs would have led to inaction otherwise. Endogenous timing has two distinct effects on coordination: a learning effect (early decisions reveal information) and a complementarity effect (early decisions eliminate strategic uncertainty for late movers). The experiments that we conduct to test these theoretical results show that the learning effect of timing has more impact on the subjects' behavior than the complementarity effect. We also observe that subjects' welfare improves significantly under endogenous timing. |
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| Keywords: | Coordination Delay Information Global games Experiment |
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