Introduction
First of all, thank you very much for taking part in this experiment. It is important to start by saying that, though part of a serious research programme, this experiment is NOT a test. There are no “right” or “wrong” answers.
How it works
Before we do anything, we have to run through a few ground rules and instructions. After that we will move to the experiment proper, where you will be asked to make decisions in a number of economic situations presented to you.
Finally you will get paid: on top of a show-up fee of £5, you will get a sum of money that will depend on your performance in the situations mentioned before.
The experiment consists of 5 stages:
Instructions Trial rounds Experiment rounds Questionnaire Payment
We will go through these in detail below.
Ground rules
For the experiment to work we need to run it according to fairly strict rules, but there are not too many:
2 8Instructions for the other treatments were similar to these ones, with the logical changes in rules and parameters needed in each case.
From now until the end of the experiment, please do not talk (it will not take long!)
If there is something you need to ask about the way the experiment works just raise your hand -the experimenter will come to your desk.
Please do not use the computer until you are told to.
The Six Stages 1 Instructions
The experimenter will read out the instructions. If you have questions, this is the time to deal with them. Just raise your hand and the experimenter will answer them privately.
2 Short quiz
This is to ensure that you understand the instructions.
3 Trial rounds
The experiment is organised in a series of rounds. Each round is a period in which you interact –via the computer only– with the other participants and make decisions that determine the amount of money you will get at the end of the session.
As a warm-up you will …rst take part in 2 trial rounds. These trial rounds are identical to the experiment rounds in every respect with one exception: the e¤ect on payment. Trial rounds do NOT a¤ect your reward at the end of the experiment. They allow you to check out the interface and familiarise yourself with the screen tables, buttons and commands. They also allow you to make mistakes without losing money.
4 Experiment rounds
This is the real thing. What you do during these rounds will determine the total amount of money you will get.
The following “Frequently Asked Questions” will lead you through the basic mechanics of the rounds.
4.1. What is this all about?
Let us start by saying that the experiment will consist of 20 experiment rounds. In each one of them the computer will pair you up with one other participant. Each of the other participants in the room is equally likely to be paired up with you.
4.2. What do I have to do?
You have to choose one of two possible actions, namely Y or Z. You choose one or the other by clicking on your preferred option in the bottom left panel of the choice screen (see …gure 1) and then pressing the “OK” button in the same panel.
Figure 1: Choice screen
4.3. How is my payo¤ for the round determined?
Your payo¤ for the round depends on your own action, the action of the other participant, and an unknown parameter called q.
4.4. But exactly howis my payo¤ for the round determined?
There are two cases to consider:
a. If you choose action Z, your payo¤ is 654 “experimental points” with certainty.
b. If you choose action Y, your payo¤ depends on both the value of q and the action of the other participant, as shown in the table below (and also in the top-left panel of the choice screen (see …gure 1)):
Value ofq
A B C
Other participant’s Y 1000 655 579
choice Z 658 651 0
That is, if you choose Z, you always get 654 “experimental points”, regardless of what the other participant does and what the value of q is. But if you choose Y, then there are several cases to consider. Let us see some of them (remembering that in all of them you choose Y and your payo¤ is measured in “experimental points”):
If the other participant chooses Y and q equals A, then your payo¤ is 1000.
If the other participant chooses Y and q equals B, then your payo¤ is 655.
And so on.
4.5. So how much money do I get then?
Your payo¤s are transformed into money at a rate of: 1000 “experimental points” = 50 pence
That is, if your payo¤ for the round is, for example, 655 “experimental points”, your corresponding money earnings are 655 50=1000 = 32:75pence.
Your session earnings are computed by adding up the money you got during the 20 experi-ment rounds.
4.6. But, what is q?
q is a parameter that can only take one of 3 values: A, B or C. In any given round, your computer will choose one of these 3 values, with probabilities 0.20, 0.60 and 0.20, respectively.
Intuitively, you can think of these probabilities in the following way: Consider an urn with 100 balls. 20 of them are labelled “A”, 60 “B” and 20 “C”. The value of q will be determined by the label of one of the 100 balls in the urn, chosen randomly (by the computer).
4.7. Is there anything I could use to make a more informed decision?
Yes, there is. Before you make a decision you will get a “hint”. This hint will be known only to you and can only take one of 3 values: a, b or c. It provides some information about the value of the unknown parameter q, as shown in the following table (and in the top-right panel of the choice screen (…gure 1)):
If hint is... ...then qis... ...with probability...
a A 1:000
b
A B C
0:125 0:750 0:125
c C 1:000
For any given round, your hint can be found immediately below this table in the choice screen (…gure 1).
The table may seem a bit complicated but do not worry, it is not. It simply says that if your hint is equal to a, then you can be sure that q is equal to A. Analogously, if your hint is equal to c, then q is equal to C. When your hint is equal to b, however, you do not know for sure what the value of q is, but you can tell how likely each value is: q is equal to B with probability 0.750, while it is equal to A or C with probabilities 0.125 and 0.125, respectively.
Important note: Although q is the same for you and the other participant, your hints may di¤er from each other.
4.8. Anything else I should know before making my choice?
If you want to make some computations before choosing your action, you can press the calculator button on the choice screen (the small square button just above the darker area (see …gure 1)). Pens and paper are available for those who prefer them: raise your hand and an experimenter will take them to your desk.
Also, it is worth mentioning that there is no “Back” button, so please make your decisions carefully and only press the “OK” or “Continue” buttons when you are sure you want to move to the next screen.
4.9. So I made my decision, what now?
After you submit your decision, you will be shown the action you chose and the payo¤
you got for the round, as well as the value that q took (see …gure 2). By clicking on the
“Continue” button you will move to a new round (if there is any still to be played).
Figure 2: Results screen
Figure 11:
4.10. And then? Is it the same over and over again?
Basically, yes. In every round, the structure is identical to the one described above: …rst a new q will be selected by the computer and you will be paired up with another participant, then you will be assigned a hint and will have to make a decision, and …nally your payo¤ will be shown on the results screen.
You can check what happened in previous periods by taking a look at the darker area in the bottom-right panel of the choice screen (see …gure 1). It includes information about the values adopted by q, the hints you got and the actions you chose in earlier rounds.
Important note: Every period is like a clean slate: the value of q, the par-ticipant you are paired up with and the hint you get may vary from round to round, but the RULES that determine them (explained in questions 4.6., 4.1.
and 4.7.) do not. In short, rounds are independent: for example, you can think that in every round a new urn with 100 balls 20 “As”, 60 “Bs” and 20 “Cs” -is used to determine the value of q, as explained in question 4.6. Similarly, the pairings and hints of a given round are independent of the pairings and hints of previous rounds.
5 Questionnaire
We will ask you a few questions that will help us to further understand the data collected in the session.
6 Payment
Finally! You will be paid a show-up fee of £5 plus the sum earned during the session, as explained in question 4.5.
And that is it. Once again, thank you very much for participating!
SHORT QUIZ
1. What is your payo¤ (in “experimental points”) if you choose Y, the person paired-up with you chooses Z and q is equal to A? . . . .
2. What is your payo¤ (in “experimental points”) if you choose Z, the person paired-up with you chooses Y and q is equal to C? . . . .
3. If your hint is equal to b, what is the probability that q is equal to A?
. . . .