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In a study conducted at the economic laboratory, Person A is randomly placed in a
group with 3 other participants. The pairing is anonymous, meaning that none of the participants will
ever know the identity of the other participants with whom he or she is grouped.
In the experiment, all group members will simultaneously make a choice and the experimenter will record this choice.
Afterwards, all individuals will be informed of the choices made by the other group members and will be paid
money based on the choices made by the individuals of the group, as well as a small participation fee. Suppose that neither individual
will receive any other money for participating in the experiment.
Each member of the group receives 10€ and must choose how to divide his/her 10€ between Project 1 and Project 2. Each member of the
group can place 0€, 2€, 4€, 6€, 8€ or 10€ in Project 1. The remainder is automatically placed in Project 2.
The decisions made by the individuals of the group will determine how much money they will earn. The payments individuals can obtain are determined as follows: