Sequence
At the beginning of every period, each of the four A-participants receives an initial endowment of 10 ECU. During the period, participants make decisions regarding the use of the endowment. The endowment is not transferable between periods, meaning that an A-participant cannot use her/his period-one-endowment in period two.
At the beginning of every period, the B-participant and C-participant receive a secure income of 30 ECU each.
1a) Decisions of A-participants
Each of the four A-participants in a group decides how much of her/his endowment to contribute to a joint pool. Specifically, A-participants choose an integer amount between 0 and 10 (indicating 0 and 10 is possible), that is contributed to the pool. The following tables show illustrative examples. The decisions made by the participants in the actual experiment may differ from the exemplary decisions. Please take a look at the following table.
Example 1
| Contribution A1 | 10 ECU | |
| + | Contribution A2 | 10 ECU |
| + | Contribution A3 | 10 ECU |
| + | Contribution A4 | 10 ECU |
| Pool | 40 ECU | |
Example 2
| Contribution A1 | 0 ECU | |
| + | Contribution A2 | 10 ECU |
| + | Contribution A3 | 2 ECU |
| + | Contribution A4 | 8 ECU |
| Pool | 20 ECU | |
1b) B-participants make estimates for A-participants’ decision
While the A-participant is making her/his decision, the B-participant estimates the decisions made by the A-participants. The estimates are private information and, hence, cannot influence the behavior of other participants.
The B-participant estimates the average contribution of the other A-participants.
1c) C-participants make estimates for A-participants’ decision
While the A-participant is making her/his decision, the C-participant estimates the decisions made by the A-participants. The estimates are private information and, hence, cannot influence the behavior of other participants.
The C-participant estimates the average contribution of the other A-participants.
2) Multiplication of the Pool
The pool is multiplied by a factor 3 . Please take a look at the following table.
Example 1
| Pool | 40 ECU |
| Multiplied pool | 120 ECU |
Example 2
| Pool | 20 ECU |
| Multiplied pool | 60 ECU |
3a) Decision of B-participant
The B-participant in every group decides which part of the multiplied pool she/he would like to release (released amount). She/He can release every integer amount between 0 and the multiplied pool (releasing 0 and the entire multiplied pool is possible).
The released amount will be equally distributed among the four A-participants of a group. If the released amount is 80 ECU (see Example 1b), every A-participant receives 80/4=20 ECU. The remaining unreleased amount of 40 ECU is equally distributed among the B-participant and C-participant. Please take a look at the following table.
Example 1
| Multiplied pool | 120 ECU |
a)
| Released amount | 120 ECU |
| Every A-participant receives | 30 ECU |
| The B-participant receives | 0 ECU |
| The C-participant receives | 0 ECU |
b)
| Released amount | 80 ECU |
| Every A-participant receives | 20 ECU |
| The B-participant receives | 20 ECU |
| The C-participant receives | 20 ECU |
Example 2
| Multiplied pool | 60 ECU |
a)
| Released amount | 60 ECU |
| Every A-participant receives | 15 ECU |
| The B-participant receives | 0 ECU |
| The C-participant receives | 0 ECU |
b)
| Released amount | 20 ECU |
| Every A-participant receives | 5 ECU |
| The B-participant receives | 20 ECU |
| The C-participant receives | 20 ECU |
3b) A-participants make estimates for other participants’ decision
While the B-participant is making her/his decision, every A-participant provides an estimate for the decisions made by other participants. The estimates are private information and, hence, cannot influence the behavior of other participants.
1. Every A-participant estimates the average contribution of the other three A-participants. Based on this estimate, the estimated multiplied pool is calculated.
Estimated multiplied pool
| Estimated total contribution of other A-participants’ (estimated average contribution multiplied by 3) | |
| + Own contribution | |
| x 3 | |
| Estimated multiplied pool | |
2. Every A-participant estimates the released amount (estimation of the part of the estimated multiplied pool that is released).
3c) C-participants make estimates for B-participant’s decision
While the B-participant is making her/his decision, the C-participant estimates the decisions made by the B-participant. The estimates are private information and, hence, cannot influence the behavior of other participants.
The C-participant estimates the released amount (estimation of the part of the multiplied pool that is released).
4) Informing A-, B- and C-Participants
At the end of each period, all participants receive detailed information.
Every A-participant learns about
- her/his endowment
- her/his contribution
- the amount she/he has not paid into the pool
- the released amount
- the own portion of the released amount
- the own period payoff
- the balance of her account (payoffs of all past periods)
Every B- and C-participant learns about
- her/his secure income
- the pool
- the multiplied pool
- the released amount
- every A-participant’s portion of the released amount
- the unreleased amount
- the own portion of the unreleased amount
- the own period payoff
- the balance of her account (payoffs of all past periods)
Period Payoff
The A-, B- and C-participants’ period payoffs are calculated as follows:
A- participant’s payoff
| Endowment | |
| - Contribution | |
| + Portion of the released amount | |
| Period payoff | |
B- participant’s payoff
| Secure income | |
| + Portion of the unreleased amount | |
| Period payoff | |
C- participant’s payoff
| Secure income | |
| + Portion of the unreleased amount | |
| Period payoff | |
Please take a look at the following table.
Example 1
| Multiplied pool | 120 ECU |
a)
| Released amount | 120 ECU |
| Every A-participant receives | 30 ECU |
| The B-participant receives | 0 ECU |
| The C-participant receives | 0 ECU |
All Participants (A, B and C) have a payoff of 30 ECU.
b)
| Released amount | 80 ECU |
| Every A-participant receives | 20 ECU |
| The B-participant receives | 20 ECU |
| The C-participant receives | 20 ECU |
All A-participants have a payoff of 20 ECU. The B-participant and C-participant have a payoff of 50 ECU
.Example 2
| Multiplied pool | 60 ECU |
a)
| Released amount | 60 ECU |
| Every A-participant receives | 15 ECU |
| The B-participant receives | 0 ECU |
| The C-participant receives | 0 ECU |
A-participants’ payoffs vary between 15 ECU and 25 ECU. The B-participant and C-participant have a payoff of 30 ECU.
b)
| Released amount | 20 ECU |
| Every A-participant receives | 5 ECU |
| The B-participant receives | 20 ECU |
| The C-participant receives | 20 ECU |
A-participants’ payoffs vary between 5 ECU and 15 ECU. The B-participant and C-participant have a payoff of 50 ECU.