Endogenous Timing and the Clustering of Agents' Decisions

This paper presents a model in which agents choose an action and a time at which to take the action. We 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. Th...

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Bibliographic Details
Published in:The Journal of political economy 1995-10, Vol.103 (5), p.1039-1066
Main Authors: Gul, Faruk, Lundholm, Russell
Format: Article
Language:English
Subjects:
Agents
Analytical forecasting
Cost functions
Decision
Decision Making (agents)
Decision making models
Economic costs
Economic efficiency
Economic forecasting
Economic models
Economic theory
Equilibrium
Expected utility
Forecasting models
Forecasts
Political Economy
Propagation delay
Studies
Timing
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Summary:This paper presents a model in which agents choose an action and a time at which to take the action. We 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.
ISSN:0022-3808
1537-534X
DOI:10.1086/262012