Your compensation for the project cost reporting task will be based on one randomly selected period of the 3-7 periods you will complete, and will be calculated using the following rules:
| 1. | {% if condition == 5 or condition == 6 %} You will receive a fixed salary of 15,000 experimental dollars. {% else %} You will receive a fixed salary of 30,000 experimental dollars. {% endif %} |
| 2. | As described previously, you will {% if condition == 5 or condition == 6 %}split (50/50) with your employee{% else %}keep{% endif %} any funds obtained through the reporting process that are in excess of the actual cost of your project. |
| 3. | You will receive an audit bonus of {% if condition == 5 or condition == 6 %}45,000{% else %}90,000{% endif %} experimental dollars for each project that is audited and for which you have reported an accurate project cost. |
| 4. | In the event that you are found through the audit process to have misreported the cost of either project, you will receive no compensation for the period. |
| 5. | {% if condition == 5 or condition == 6 %} Note that experimental dollars will be converted to real dollars at a rate of 5,000 = $0.50. {% else %} Note that experimental dollars will be converted to real dollars at a rate of 5,000 = $0.25. {% endif %} |
For illustrative purposes, consider the following total compensation calculation examples:
1. In the period randomly selected for compensation, a participant makes cost reports indicating the costs for {% if type == 1 %}projects A and B {% else %}projects B and A{% endif %} to be 80,000 and 90,000, respectively. The actual costs of projects {% if type == 1 %}A and B{% else %}B and A{% endif %} were 60,000 and 70,000, respectively. The other division manager submitted identical cost reports, so no audits were conducted. Therefore, the participant obtained 20,000 (80,000 - 60,000) in additional funds above the actual cost of their project, which they {% if condition == 5 or condition == 6 %} split 50/50 with their employee. {% else %} keep for themselves.{% endif %} The participant’s compensation for the experiment would be:
| Fixed salary | {% if condition == 5 or condition == 6 %}= 15,000{% else %}= 30,000{% endif %} |
| Additional funds obtained above actual project costs {% if condition == 5 or condition == 6 %}split 50/50 with employee{% else %}kept for self{% endif %} | = {% if condition == 5 or condition == 6 %}10,000{% else %}20,000{% endif %} |
| Total received from the reporting task | {% if condition == 5 or condition == 6 %}= 25,000{% else %}= 50,000{% endif %} |
| Compensation for the task ({% if condition == 5 or condition == 6 %}25,000/5,000 experimental dollars per $0.50{% else %}50,000/5,000 experimental dollars per $0.25{% endif %}) | = $2.50 |
| Compensation earned from the second task | = $X |
| Participation Fee | = $2.00 |
| Total Compensation | = $4.50 + X |
2. In the period randomly selected for compensation, a participant makes cost reports indicating the costs for {% if type == 1 %}projects A and B {% else %}projects B and A{% endif %} to be 65,000 and 70,000, respectively, while the other division manager reports those costs to be 85,000 and 90,000, respectively. Since the cost reports made by the two managers do not match for either project, both projects were audited. The actual costs of {% if type == 1 %}projects A and B{% else %}projects B and A{% endif %} were found to be 65,000 and 70,000, respectively. The participant’s compensation for the experiment would be:
| Fixed salary | {% if condition == 5 or condition == 6 %}= 15,000{% else %}= 30,000{% endif %} |
| Audit bonus for accurate reporting of Projects A and B | {% if condition == 5 or condition == 6 %}= 90,000{% else %}= 180,000{% endif %} |
| Total received from the reporting task | {% if condition == 5 or condition == 6 %}= 105,000{% else %}= 210,000{% endif %} |
| Compensation for the task {% if condition == 5 or condition == 6 %}(105,000 lira / 5,000 experimental dollars per $0.50){% else %}(210,000 lira / 5,000 experimental dollars per $0.25{% endif %}) | = $10.50 |
| Compensation earned from the second task | = $X |
| Participation Fee | = $2.00 |
| Total Compensation | = $12.50 + X |
Note that in this example, the other division manager receives no compensation as they were found to have misreported the cost of both projects.
Please click "Next" when ready to proceed to a brief quiz to check your understanding of the instructions you have read.