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Endogenous Timing and the Clustering of Agents' Decisions

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  • Gul, Faruk
  • Lundholm, Russell

Abstract

This paper presents a model in which agents choose an action and a time at which to take the action. The authors show that, when agents choose when to act, their decisions become clustered together, giving the appearance of an information cascade even though information is actually being used efficiently. This occurs because the passage of time allows the first acting agent to anticipate something about the second agent's information and, for a large class of delay cost functions, the equilibrium orders agents in such a way that the most extreme information is revealed first. Copyright 1995 by University of Chicago Press.

Suggested Citation

  • Gul, Faruk & Lundholm, Russell, 1995. "Endogenous Timing and the Clustering of Agents' Decisions," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 1039-1066, October.
    • Handle: RePEc:ucp:jpolec:v:103:y:1995:i:5:p:1039-66
    DOI: 10.1086/262012
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    References listed on IDEAS

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    1. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
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    5. Stinchcombe, Maxwell B., 1992. "Maximal strategy sets for continuous-time game theory," Journal of Economic Theory, Elsevier, vol. 56(2), pages 235-265, April.
    6. Bulow, Jeremy & Klemperer, Paul, 1994. "Rational Frenzies and Crashes," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 1-23, February.
    7. Scharfstein, David S & Stein, Jeremy C, 1990. "Herd Behavior and Investment," American Economic Review, American Economic Association, vol. 80(3), pages 465-479, June.
    8. Bliss, Christopher & Nalebuff, Barry, 1984. "Dragon-slaying and ballroom dancing: The private supply of a public good," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 1-12, November.
    9. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 797-817.
    10. Kenneth Hendricks & Dan Kovenock, 1989. "Asymmetric Information, Information Externalities, and Efficiency: The Case of Oil Exploration," RAND Journal of Economics, The RAND Corporation, vol. 20(2), pages 164-182, Summer.
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