An experiment of social learning with endogenous timing

K. Hyndman, C. Bogachan

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

In this paper, we experimentally investigate a social learning model with endogenous timing. Specifically, we focus on a model, in which two subjects are supposed to make a binary decision. One alternative is a safe action with a fixed payoff, while the other alternative is a risky action. The subjects can make their decisions in three stages. The safe action is reversible, but the risky action is not. A subject who delays his decision can observe the decision of the other subject in the earlier stages, and as a result, acquire more information. We show that players do delay their decisions in order to obtain more information. Furthermore, they delay especially when their private information does not particularly support the risky action. We also find evidence which suggests that risk aversion plays an important role in timing decisions, often leading to ex post inefficient outcomes.

Original languageEnglish
Pages (from-to)251-268
Number of pages18
JournalReview of Economic Design
Volume16
Issue number2-3
DOIs
Publication statusPublished - Sep 2012

Keywords

  • Delay
  • Information
  • Experiment
  • INFORMATIONAL CASCADES
  • HERD BEHAVIOR
  • MODEL

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