You are participating in an experiment on decision making. You are not allowed to talk or try to communicate with other participants during the experiment. If you have a question, please raise your hand.
In this experiment you will be asked to make decisions in 40 periods. In each period, you will be randomly matched with (an)other participant(s): in odd periods you will be matched with 1 other participant so that you are in a group of 2. In even periods you will be matched with 3 other participant so that you are in a group of 4. The identity of the other participants you will be matched with will be unknown to you.
In each period, you and the other member(s) in your group (referred to as the “others”) will be asked to decide at what time to make a costly investment. The time of investment can be any integer number between 0 and 100, where 0 means an immediate investment and 100 means no investment. You will take your decisions without seeing the decisions of others in your group.
The return to the costly investment will depend on the time of the earliest investment in your group and whether the investment succeeds or fails. The investment will succeed with probability 50% and fail with probability 50%. The computer will randomly determine whether the investment succeeds or fails. If the investment succeeds, the return to it will be 100 minus the earliest investment time in your group. If the investment fails, the return to it will be 0. All members of the group will equally benefit from the return of this investment. No additional return is accrued if two or more group members make the costly investment.
The group member with the earliest investment time will pay the cost of investment, which is 25 minus a quarter of his/her investment time, while all others will not bear any cost of investment. If there are more than one group member with the earliest time, they will share the cost equally. The cost of investment is the same whether the investment succeeds or fails.
For example, suppose that in a group of 4, the group members choose the following investment times: 20, 16, 53 and 98. The earliest investment time, chosen by the second group member, is equal to 16. As a result, the return to each group member will be 100-16=84 if the investment succeeds or 0 if it fails. The cost of the investment will be 25-16/4=21 and will only be paid by the second group member, irrespective of whether the investment succeeds or fails. In this scenario, the earnings of the group members with the investment times 20, 12, 53, 98 will respectively be 84, 63, 84, 84 if the investment succeeds and 0, -21, 0, 0 if the investment fails.
You can calculate your earnings in more detail for any group investment time choice of yours and your group members by using the EARNINGS CALCULATOR on your screen.
In each period, prior to the described decision situation, you will be asked whether you want to chat with your group members to try to coordinate your investment times. If at least two group members choose to chat, then chat will realize among you and the group members who had chosen to chat (referred to as the “chat group”). In this case, everyone in the chat group will first be asked to enter a suggestion for the common investment time. These suggestions will be shown to everyone in the chat group. Then the chat group members can chat with each other for a limited amount of time (3 minutes in periods 1-5, and 1 minute in periods 6-40). You may choose to leave the chat screen any time you wish, in which case you will not be able to see the rest of the conversation.
The group members who choose not to chat will directly be forwarded to the decision screen and make an individual decision. They will not be shown the suggestions made by the chat group members not any conversation between chat group members.
Once the time for chat is up, everyone in the chat group will automatically be forwarded to the decision screen. In this case, you will be asked to enter an investment time. If you and others in the chat group submits the same investment time and this turns out to be the earliest investment time in your group, then the cost of investment will automatically be shared by the members of your chat group. If at least one person from the chat group submits a different investment time than the rest, an agreement will not be reached among the chat group and all chat group members will be asked to submit their final investment time decisions.
For example, suppose that in a group of 4, three members of the group chooses to chat. The chat group members all submit the same investment time of 16. The fourth player submits investment time 20. Then the return will be 100-16=84 for all the four members if the investment succeeds, and 0 if it fails. The cost of investment will be 25-16/4=21 and be shared by the three chat-subgroup members. Namely, all the three members who had the chat will pay 7 irrespective of whether the investment succeeds or fails. In this scenario, the earnings of the group members with the investment times 16, 16, 16, 20 will respectively be 77, 77, 77, 84 if the investment succeeds and -7, -7, -7, 0 if the investment fails.
Once everyone in your group submits their decisions, you will be directed to the results page and be provided with the following information on your screen: whether the investment succeeded or no, investment times, and earnings of everyone in your group.
After the 40 periods, we will ask you to complete a number of additional tasks.
At the end of the experiment, your earnings will be paid in cash by the experimenter. Your total earnings are the sum of your earnings in points over all periods of the experiment (including your earnings from the additional tasks). Your earnings in points will be converted into euros. The exchange rate is €15 for 1000 points.
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