Clock games: Theory and experiments

Abstract

In many situations, timing is crucial—individuals face a trade-off between gains from waiting versus the risk of being preempted. To examine this, we offer a model of clock games, which we then test experimentally. Each player's clock starts upon 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) delay decreases as clocks become more synchronized, and (ii) when moves are observable, players “herd” immediately after any player makes a move. Our experimental results are broadly consistent with these two key predictions of the theory.