Timing Games: Theory and Applications

• Applicants: Professor Eugen Kovac, Ph.D.; Professor Dr. Robert Schmidt
• Subject Area: Economic Theory ; Economic Policy, Applied Economics
• Term: since 2020
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 450175676

Timing of actions is a key aspect of strategic decision-making. Examples range from the question when a politician announces the intention to run for president, all the way to timing-decisions in market situations, for instance, when to introduce a new product. Timing can be as important for the success of a firm in a market, as the choice of the characteristics of a new product. The goal of this research project is to improve our understanding of the timing of actions in various economic environments. To this end, we introduce a novel, unified game-theoretical modeling framework of strategic interaction in continuous time, where each out of two players is free to decide when to implement an action of her own choice. In many existing models of economic decision-making, the timing of the players’ actions is treated as exogenously given. Allowing players to determine the timing and, hence, the order of their own moves, along with the action choices, is thus a major step forward. In many applications, a player will behave differently when being in the leader’s rather than in the follower’s position, or when moving simultaneously with the other player. For example, a firm that observes the price chosen by its competitor, can take advantage of this information and gain additional market shares by undercutting this price. A deeper understanding of the strategic interplay of players’ timing and action choices is, therefore, also relevant for the performance of firms in markets, or for regulators. An additional goal of our project is to develop a better understanding of the timing of decisions in specific environments. First, we focus on electoral competition games, that we can embed in our general dynamic framework, thereby allowing the candidates to freely determine the timing of their policy announcements before an election. Second, we analyze the timing of patents in innovation races, when firms engage in research and development for multiple products. In each of these cases, our research agenda provides a significant advance compared to the existing literature in the respective field (political economy, resp. industrial organization theory). And last but not least, we will test our main theoretical predictions experimentally. Going beyond the theory by letting real people play games can provide important additional insights, as well as inspirations for future research.

• DFG Programme: Research Grants
• International Connection: USA
• Co-Investigator: Professorin Dr. Lisa Bruttel
• Cooperation Partners: Professor Dr. Larry Karp; Professor Leo Simon, Ph.D.