The BLUE player decision will consist in selecting an effort level in each of the 20 decision rounds. Each effort level is associated with a monetary cost in tokens. On your desk there is a sheet called “EFFORT CHOICE AND ITS COST FOR BLUE PLAYERS”. This sheet shows 101 numbers from 0 to 100 in the first column. These are your potential effort choices. Associated with each effort number are the costs of choosing an effort level according to the cost shown in the effort table. All BLUE players have the same effort cost table, regardless of their subtype. Note that the higher the effort chosen, the higher the associated cost.
Your effort choice will not be directly revealed to the GREEN player (more details about the decision of the GREEN player will be explained in the next section).
In each decision round, the computer will ask each BLUE player to choose an effort. Therefore, you and the other BLUE player in your group will each separately choose one effort number.
After you have selected your effort, the computer will ask you to generate a random number. You need to do this by hitting the button “GENERATE RANDOM NUMBER”. Hitting the button causes the computer to select one of the 61 numbers that fall between -30 and +30, including 0. Each of these 61 numbers has an equally likely chance of being chosen when you hit the button. Hence, the probability that the computer selects, say, +30 is the same as the probability that it selects -30, 0, -20 or 18.
Each BLUE player will follow the same procedures, so that each participant can generate his or her random number separately. That is, the random number generated by one BLUE player is independent of the random number generated by the other BLUE player.
The sum of your chosen effort and the random number is your performance. Your performance will not be directly revealed to the GREEN player (details about the GREEN player’ decision will be shown below).
There is an additional factor that impacts your total work output. It is a number that represents a specific project assigned to each type of BLUE player. In particular, these are the project-specific numbers for each subtype of the BLUE players:
| Subtype of BLUE player | Specific Project |
|---|---|
| LIGHT BLUE | 50 |
| DARK BLUE | 10 |
Therefore, the project-specific number for LIGHT BLUE is 50 and for DARK BLUE is 10.
For each type of BLUE player, the project-specific number remains constant for the entire experiment. Since the role of each player is kept constant throughout the entire experiment, the project-specific number is also kept constant for all decision rounds.
The GREEN player observes your subtype (either for LIGHT BLUE or DARK BLUE) and therefore your project specific number.
Both your performance (which is the sum of your effort choice and your random number) as well as the specific project number contribute to your total work output. The importance of their respective contribution is calculated as follows:
In other words, 60% of your work output is given by your performance and 40% is given by your specific project. These shares are the same for both BLUE players, remains constant over all 20 decision rounds, and is known to all players, including the GREEN player.
The GREEN player does not observe your effort choice nor your random number. However, the GREEN player observes your subtype (either LIGHT BLUE or DARK BLUE). The GREEN player also observes the total work output of the BLUE players at the end of each round.
In each round, after you made your effort choice, we will ask you three follow-up questions to help us better understand your effort choice and the reasoning behind it. In particular, you will be asked to guess the decision of the GREEN player, to state how confident you are in that guess, and to guess the effort chosen by the other BLUE player.
The GREEN player must allocate a low payment and a high payment to the BLUE players. The GREEN player does this by choosing an allocation rule that depends on the total work outputs of each BLUE player. The GREEN player is free to choose the allocation rule. The low fixed payment is 0.5 tokens. The high fixed payment is 4.5 tokens. More details about the decision of the GREEN player are found in the next of the instructions.
Player GREEN has an incentive to allocate the higher payment to the BLUE player with the higher effort (that is: The number chosen by the LIGHT BLUE and the DARK BLUE player, independent of the random number and the specific project number). However, recall that the other BLUE player’s effort and your own effort are not revealed to the GREEN player.
The BLUE player's payoff consists of the payment assigned by the GREEN player (either low or high) minus the cost of the effort. Recall that the cost of effort is a function of your effort, see Table 1.
If you are the BLUE player who was assigned the high payment by the GREEN player, you earn in that round:
If you are the BLUE player who was assigned the low payment by the GREEN player, you earn in that round:
Your total compensation will be the show-up fee plus your payoff in each round. Note that your total payoff in a certain round can be negative. However, note that you can avoid negative payments through your own decision making if you wish to do so. Also, your final payment for the experiment cannot fall below the show-up fee. You will be paid in cash at the end of the experiment.