Instructions
You have been randomly and anonymously paired with another player. Each
of you will be randomly assigned to be
Participant A or Participant B. You will learn your role before making
any decision.
Participant A will propose a contract to B that has 2 components:
- Fixed Payment, which can be any number from -30 to
30
- Return Share, which can be a multiple of 10%, that
is 10%, 20%, … , 90%, or 100%
Note that a negative fixed payment means that Participant B will have
to pay the amount to Participant A.
Once Participant A has submitted the contract, Participant B must
decide whether to accept or to reject it. If rejected, A will receive
nothing while B will receive 10 points. If accepted, Participant B then
chooses:
- Effort Level, which can be any whole number from 1
to 10
Effort is costly only to Participant B and determines the total return,
which will be apportioned according to the proposed return share. The
following table shows the relationship between B's effort, the cost of
effort, and the resulting total return:
Effort Level |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
10 |
Effort Cost |
0 |
4 |
8 |
12 |
18 |
24 |
32 |
40 |
50 |
60 |
Total Return |
14 |
28 |
42 |
54 |
70 |
84 |
98 |
112 |
126 |
140 |
Given that the contract is accepted, Participant A will receive:
(100% – [B’s Return Share in %]) × [Total Return] – [B’s Fixed
Payment]
and Participant B will receive:
[B's Return Share in %] × [Total Return] + [B's Fixed Payment]
– [B's Effort Cost]