INSTRUCTIONS
Introduction
This is an experiment about decision making. The instructions are simple, and if you follow them carefully and make good decisions, you could earn a considerable amount of money, which will be paid to you in cash.
Specific Instructions
As you read these instructions you will be in a room with a number of other subjects. Each subject has been randomly assigned to either Group A or Group B. Each Group A person has a corresponding group B partner and vice versa.
The experiment consists of 75 decision rounds. In each decision round, group A people will be playing against a computerized subject that has been programmed to make the same decision in every round. The computerized subject matched with a person in group A remains the same throughout the entire experiment.
Experimental Procedure
We will proceed by first describing the experimental procedures for Group A subjects and then for Group B subjects.
Group A Subjects
In the experiment you will perform a simple task. Attached to these instructions is a sheet called your "Decision Cost Table" (Table I). This sheet shows 101 numbers from 0 to 100 in column A. These are your decision numbers. Associated with each decision number is a decision cost, which is listed in column B. Note that the higher the decision number chosen, the greater is the associated cost. One part of your computer screen should look as follows as you enter the lab (we will call this part of the screen Window 1):
PLAYER # ______
ROUND DECISION# ADVICE# RANDOM# TOTAL# COST EARNINGS
Ineach decision round the computer will ask you to choose a decision number. Your computerized pair member will also choose a decision number. It will always choose the same decision number, which will be 37 in each decision round. You, of course, are free to choose any number you wish among those listed in column A of your "Decision Cost Table." Using the number keys, you will enter your selected number and then hit the Return (Enter) key. To verify your selection, the computer will then ask you the following question:
Is______your decision number? [Y/N]
If the number shown is the one you desire, hit the Y key. If not, hit the N key and the computer will ask you to select a number again. After you have selected and verified your number, this number will be recorded on the screen in column 2, and its associated cost will be recorded in column 5. After you have selected your decision number, the computer will generate a random number that falls between 40 and +40 (including 0). Each of these 81 numbers has an equally likely chance of being chosen when you hit the space bar. Hence, the probability that the computer selects, say, +40 is the same as the probability that it selects 40, 0, 12 or +27. Another random number (again between 40 and + 40) will be automatically generated for your computerized pair member as well. The processes that generate your random number and the random number assigned to your computerized pair member are independenti.e., you should not expect any relationship between the two random numbers generated to exist.
Finally, at the beginning of each round, before you have made your choice, your Group B partner will hand you a sheet of paper containing what he/she thinks you should choose for that round. It is his or her advice to you. This piece of information you will input in the Excel spread sheet located in a window on your computer screen (we will call this Window 2). Enter this value in the column 2 labeled “Advice”.
Payoffs
Your payment in each decision round will depend on the decision number you choose, the decision number chosen by your computerized pair member, the random numbers of you and your computerized pair members and also on the advice given to you by your associated Group B member.
To be more precise, after you select a decision number and generate a random number, the computer will add these two numbers and record the sum on the screen (Window 1) in column 5. We will call the number in column 5 your "Total Number". The computer will do the same computation for the computerized pair member as well. The computer will then compare your Total Number to that of the computerized pair member. If your Total Number is greater than the computerized pair member's Total Number, then you will receive the high fixed payment of 29 Fr., in a fictitious currency called Francs. If not, then you will receive the low fixed payment 17.2 Fr. Whether you receive the fixed payment 29 Fr. or the fixed payment 17.2 Fr. only depends on whether your Total Number is greater than your computerized pair member's Total Number. It does not depend on how much bigger it is. The Francs will be converted into dollars at the conversion rate to be stated below. The computer will record which fixed payment you receive. If you receive the high fixed payment (29 Fr.), then "M" will appear in column 8. If you receive the low fixed payment (17.2 Fr.), "m" will appear. After indicating which fixed payment you receive, the computer will make two subtractions from your fixed payment. One will be equal to your decision cost associated with your decision number (column 6). These costs are the ones found on the cost table (Table 1) handed to you. The number next to the letter “m” or “M” shows your earning after subtracting this cost from the fixed payment. We will call this your “gross earning”.
There is another cost that is associated with how closely you followed the advice of your Group B member. More formally, let us say that your Group B member advises you to choose the decision number da while you choose dc. In such a case we will subtract an extra .025(dc - da)2 from your payment. Call this your “advice cost” that you incur by not following the advice as closely as possible. In such a case your final payment will be: Final Payoff = Fixed payment {M or m}– decision cost – .025(dc - da)2 .
Obviously, you face a tradeoff in your decision making. If you follow the advice of your Group B member exactly, you minimize your advice cost but jeopardize your payoff in the game you are playing against your computerized pair member. On the other hand, if you think you know how to play the game correctly, the number you may want to choose could be far away from the number you are advised to play and hence you will incur large advice costs.
To help you get a feel for your advice cost we present Table 2 that lists the cost you will incur for each deviation of the number you choose from the one you were advised to choose. Note that these costs increase at an increasing rate. Again, note that these costs are only dependent on the difference between what you choose and what the advice was. The absolute quantities of each of those numbers do not play any role in determining the advice cost.
To find your final payoff at the end of each round your must do the following. Column 8 of your screen (Window 1) lists your gross earnings (which is the fixed payment {M or m} less your decision costs). It is your payoff exclusive of your advice costs. In the excel sheet on your computer input your advised number in column 2 and your chosen number in column 3. Column 4 will then automatically indicate your advice cost. In column 5, input your gross earnings. Column 6 will then automatically indicate your final payoff, which we call “Net earnings”. Column 7 indicates the payoff of your Group B partner.
Thus, in each round you have to enter three things in the Excel sheet: the advice given to you by your Group B partner (Column 2), your own decision number (Column 3) and your Gross earnings (Column 5).
Example of Payoff Calculations
Suppose that the following occurs during one round: the group A person chooses a decision number of 60, generates a random number of 10 and gets an advice of 43, while computerized pair member Q, selects a decision number of 37 and gets a random number of 5. Group A person would receive the high fixed payment of 29 Fr but from that he or she would have to subtract 7.2 Fr. (the cost of the decision number 60) and also the advice costs of -7.23 = .025(60-43)2 . The payoff to the Group A member would then be 14.57 = 29Fr –7.2Fr- 7.23 Fr.
Note that the decision cost subtracted in column 6 in Window 1 of the screen is a function only of the decision number; i.e., the random number does not affect the amount subtracted. Also, note that the earnings of Group A member depend on the following: the decision number that he selects (both because it contributes to the Total Number and because it determines the amounti.e., the Decision Costto be subtracted from the fixed payment), the computerized pair member's preselected decision number (37), the generated random number, and the computerized pair member's generated random number and finally, the advice cost.
Continuing Rounds
After round 1 is over, you will perform the same procedure for round 2, and so on for 75 rounds. In each round the round will start by your Group B pair member handing you a slip of paper with their advice on it. You will input this number into your Excel sheet and then choose a decision number and generate a random number by pressing the space bar. The Total Number will be compared to the Total Number of the computerized pair member, and the computer will calculate your gross earnings for the round. You will then input your decision number and gross earnings into your Excel sheet and view your net earnings for the round. When round 75 is completed, the computer will ask you to press any key on its keyboard. After you do this, the computer will add the Francs earnings from each of the 75 rounds and convert this sum in Dollars at the rate of $0.01 per Franc. We will then pay the respective amounts to you and your Group B partner.
Group B Subjects:
As you can see from the instructions above, your task in each round is to write advice to your Group A pair member, make sure they enter the advice and their decision number correctly into the Excel sheet, and then fill out your worksheet which we will hand you that will allow you to record the advice and decision numbers chosen round by round. The payoff for the Group B members is simply equal to ¾ of what his or her associated Group A member earns. So, in each round after the Group A member’s payoff is determined, the Group B member’s payoff will be equal to ¾ of that amount. So your payoff is directly proportional to the payoff of the Group A member You will also keep a close watch on the numbers that the Group A member enters on the Excel spreadsheet and would write down those numbers on the worksheet we hand you. If, you notice that the Group A member has made a mistake in entering a number, then you should raise your hand.
Under no circumstances will there be any conversation allowed between a Group A and a Group B member. In fact, there must be total silence during the experiment and no show of emotion in any way.
Continuing Rounds
After round 1 is over, we will move to round 2 where the same procedures will be followed. Group B members will write their advice on a piece of paper and hand it to their Group A counter part. Group A members will perform the same procedure for round 2 as they did in round 1, and so on for 75 rounds. More precisely, in each round, the Group B member will write down on a piece of paper the decision number he/she advices the paired Group A member to choose. The Group A member will then input the advice in Column 2 of the Excel spread sheet and hand back the advice sheet to the Group B member. The Group A member will then fill other relevant columns of the spreadsheet as has been explained earlier. The Group B member, meanwhile, will keep a close watch on the numbers that the Group A member enters and would also write down those numbers on a sheet of paper.
The Total Number will be compared to the Total Number of the computerized pair member, and the computer will calculate your earnings for the round. When round 75 is completed, the computer will ask your group A partner to press any key on its keyboard. After he/she does this, the computer will add the Francs earnings from each of the 75 rounds and convert this sum in Dollars at the rate of $0.01 per Franc. We will then pay the respective amounts to Group A and Group B members.
Table I
Decision Cost
A B A B A B A B
Dec # Cost (fr) Dec # Cost(fr) Dec # Cost(fr) Dec # Cost(fr)
00.00261.35525.41 78 12.17
10.0027 1.46535.62 79 12.48
20.01281.57545.83 8012.80
30.02291.68556.05 8113.12
40.03301.80566.27 8213.45
50.05311.92576.50 8313.78
60.07322.05586.73 8414.11
70.10332.18596.96 8514.45
80.13342.31607.20 8614.79
90.16352.45617.44 8715.14
100.20362.50627.69 8815.49
110.24372.74637.94 8915.84
120.29382.89648.19 9016.20
130.34393.04658.45 9116.56
140.39403.20668.71 9216.93
150.45413.36678.98 9317.30
160.51423.53689.25 9417.67
170.58433.70699.52 9518.05
180.65443.87709.80 9618.43
190.72454.067110.08 9718.82
200.80464.237210.37 9819.21
210.88474.427310.66 9919.60
220.97484.617410.95 10020.00
231.06494.807511.25
241.15505.007611.55
251.25515.2077 11.86
Table 2 : Advice Cost
dc-daCost(fr)dc-daCost(fr)) dc-da Cost(fr) dc-da Cost(fr)
0 0.00 26 16.905267.60 78 152.10
10.03 27 18.235370.23 79 156.03
20.10 2819.605472.90 80160.00
30.23 2921.035575.63 81164.03
40.40 3022.505678.40 82168.10
50.63 3124.035781.23 83172.23
60.90 3225.605884.10 84176.40
71.23 3327.235987.03 85180.63
81.60 3428.906090.00 86184.90
92.03 3530.636193.03 87189.23
102.50 3632.406296.10 88193.60
113.03 3734.236399.23 89198.03
123.60 3836.1064102.40 90202.50
134.23 3938.0365105.63 91207.03
144.90 4040.0066108.90 92211.60
155.63 4142.0367112.23 93216.23
166.40 4244.1068115.60 94220.90
177.23 4346.2369119.03 95225.63
188.10 4448.4070122.50 96230.40
199.03 4550.6371126.03 97235.23
2010.00 4652.9072129.60 98240.10
2111.03 4755.2373133.23 99245.03
2212.10 4857.6074136.90 100250.00
2313.23 4960.0375140.63
2414.40 5062.5076144.40
2515.63 5165.0377 148.23