Subjects in a laboratory experiment withdraw earnings from a cash reserve evolving according to an arithmetic Brownian motion in near-continuous time. Aggressive withdrawal policies expose subjects to risk of bankruptcy, but the policy that maximizes expected earnings need not maximize the odds of survival. When profit maximization is consistent with high rates of survival (HS parameters), subjects adjust decisively towards the optimum. When survival and profit maximization are sharply at odds (LS parameters), subjects persistently (and sub-optimally) hoard excess cash in an evident effort to improve survival rates. The design ensures that this hoarding is not due to standard risk aversion. Analysis of period-to-period adjustments in strategies suggests instead that hoarding is due to a widespread bias towards survival in the subject population. Robustness treatments varying feedback, parameters, and framing fail to eliminate the bias.

The theory of continuous time games (Simon and Stinchcombe (1989), Bergin and MacLeod (1993)) shows that continuous time interactions can generate very different equilibrium behavior than conventional discrete time interactions. We introduce new laboratory methods that allow us to eliminate natural inertia in subjects' decisions in continuous time experiments, thereby satisfying critical premises of the theory and enabling a first‐time direct test. Applying these new methods to a simple timing game, we find strikingly large gaps in behavior between discrete and continuous time as the theory suggests. Reintroducing natural inertia into these games causes continuous time behavior to collapse to discrete time‐like levels in some settings as predicted by subgame perfect Nash equilibrium. However, contra this prediction, the strength of this effect is fundamentally shaped by the severity of inertia: behavior tends towards discrete time benchmarks as inertia grows large and perfectly continuous time benchmarks as it falls towards zero. We provide evidence that these results are due to changes in the nature of strategic uncertainty as inertia approaches the continuous limit.