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In a study conducted at the economic laboratory, Person A is randomly paired with another participant, Person B.
The pairing is anonymous, meaning that none of the participants will ever know the identity of the other participant
with whom he or she is paired.
In the experiment, Person A will make a choice, the experimenter will record this choice, and then
Person B will be informed of the choice and both will be paid money based on the choice made by Person A. Additionally, both
will receive a small participation fee. Suppose that neither Person A nor Person B will receive any other money for participating
in the experiment.
In each pair, Person A earns 10€ by answering a questionnaire that lasted 30 minutes.
Person B did not have the opportunity to earn any money.
Person A will then have the opportunity to give any amount of his or her earned 10€ to Person B.
That is, Person A can give any of the 10€, in 1€ increments,
to Person B. For instance, Person A may decide to give 0€ to Person B and keep 10€ for him or herself.
Or Person A may decide to give 10€ to Person B and keep 0€ for him or herself.
Person A may also choose to give any other amount between 0€ and 10€ to Person B, in 1€ increments.
This choice will determine how much money each will receive, privately and in cash, at the end of the
experiment.
You can find an overview of the possible actions and the corresponding earnings here: