You and another participant are randomly selected into one group. One of you plays the role of Firm, and the other plays the role of Customer. Your role won't change in the entire experiment.

Firm’s task is to decide how much effort to invest in developing an educational product with the Customer and what price to charge the Customer.

Customer’s task is to decide how much effort to invest in developing the educational product with Firm and whether to buy the product.

In Stage 1, Firm sets up the price, which can be any number between 0 and 120.

In Stage 2, Customer will be informed of the price set up by Firm. Then both Firm and Customer decide how much effort to invest in developing the product. They can choose any number between 0 and 120. The effort is costly only to the person who invests it. The cost is 1/100 of the square of the effort invested. Say, you invest effort e, your cost will be 0.01×e×e.

In Stage 3, Customer will be informed of the effort Firm invested. Then Customer decides whether to buy the product. If the product is bought, then the benefit to the Customer is the sum of the effort Firm and Customer invested plus a random number between -30 to 30 (equal chance to draw each number).

Firm’s payoff is price – cost of effort if Customer decides to buy, or – cost of effort if Customer decides not to buy.

Customer’s payoff is benefit – price – cost of effort if she or he decides to buy, or – cost of effort if not to buy.