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There will be multiple periods in today’s session. Each COO and DM pair will be randomly re-paired prior to the beginning of each period. Each period is independent and has no influence on any other period. At the end of today’s session, one period will be randomly selected and your earnings in that period will be paid to you via Prolific. Because each period is equally likely to be the payment period, you should treat each period as if it were the payment period.
The DM’s earnings are equal to the amount of the divisional budget not invested in either the production project or tree-planting project in the payment period.
The COO’s earnings consist of two parts: (1) the amount of the return on the production project that the DM remitted to the COO in the payment period; (2) a bonus from the Board of Directors in an amount equal to 10% of what is invested in the tree-planting project. This bonus is independent of any other earnings outlined in this study.
That is, the COO’s earnings = the amount that the DM sends back to the COO out of 400a + 10% of the DM’s investment in the tree-planting project.
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