Simulating spatial perception - with cosine wave based sound - in MATLAB
Try this

DELAY = 0.5e-3; % half a millisecond for starters. 
t = [ 0 : 1 : 2000 ]';   % Time Samples, COLUMN vector
f = 500;    % Input Signal Frequency 500Hz
fs = 44100; % Sampling Frequency
x =  cos(2 * pi * f / fs * t);  % Generate Sine Wave
y =  cos(2 * pi * f * ( t/fs - DELAY));  % Generate Sine Wave
Y = [x,y];


A bunch of problems with your code


Your variable t was a row vector so you generated a mono output signal
The units of your DELAY variable are unclear. I have written it in a way so that it is in actual seconds.