Thank you for participating in today's experiment. In this experiment, the decisions that you and others make will determine the number of points you earn. At the end of the experiment, your points will be multiplied by 50 and added to your cumulative raffle ticket counts.
Below you will find the rules to this experiment. Please read them carefully.
In this experiment, you will be interacting in an online market. There will be 8 trading periods in which you can earn points by trading. At the beginning of each period, you will be assigned the role of either a buyer or seller of a fictitious good.
In each trading period, buyers will try to purchase a unit from a seller. Similarly, each seller will try to sell a unit to a buyer.
Each period will last for no more than 3 minutes in which trades can take place.
Please read the instructions for both buyers and sellers carefully as you may experience both roles throughout the course of the experiment.
In each trading period, each buyer can buy one unit of a fictional good. By buying, and hence owning this good, buyers receive a benefit in terms of valuation. At the beginning of each trading period, each buyer learns how much the good is worth to them (i.e. buyers learn their own valuation). These valuations may be different for each buyer and are measured in points. The valuations will be randomly assigned to the buyers in each period.
In each period, buyers can submit BIDS representing the number of points they are willing to trade for the good while sellers can submit ASKS representing the number of points they are willing to receive. Buyers make a BID by entering a number in the "Make offer" box. Once an offer is entered it will show up under "Bids" on the bottom left part of the screen.
A trade will take place when there is an ASK less than or equal to a BID:
Once a trade has taken place, a buyer's "Items in your possession" will equal 1.
The price at which the trade is made is equal to the buyer's BID.
If there are multiple instances when a trade should take place, for example when there are multiple BIDS or ASKS of the same value, then one pair will randomly be chosen for the trade.
At the bottom of the screen is a graph that records both the time and price for each trade. The horizontal axis measures the real time, in seconds, for a trading period. The vertical axis measures the price at which a trade is made. Each dot on this graph represents both the price and the time a trade takes place. In the image above, there are three trades. The first occurred a little over 90 seconds into the trading period at a price of 20, the second took place a little over 100 seconds into the trading period at a price of 10, and the third took place at 120 seconds into the trading period at a price of 10.
A buyer can earn points by buying a good from a seller. If a trade occurs, a buyer gets the valuation minus the price:
If no trade occurs, a buyer earns 0 points.
In each trading period, each seller can sell one unit of a fictional good. At the beginning of each trading period, each seller learns how much it costs them to produce the good (i.e. sellers learn their own production costs). These costs may be different for each buyer and are measured in points. The costs will be randomly assigned to the sellers in each period.
In each period, sellers can submit ASKS representing the number of points they are willing to sell their good for while buyers can submit BIDS representing the number of points they are willing to trade for the good. Sellers make an ASK by entering a number in the “Make offer” box. Once an offer is entered, it will show up under “Asks” on the bottom right part of the screen.
The rules of trading are as described above in the Instructions for Buyers.
A seller can earn points by trading (i.e. by selling their good to a buyer). If a trade occurs, a seller gets the price minus their cost:
If no trade occurs, the good is not produced (i.e. the seller does not pay the production costs). Thus, if no trade occurs, a seller earns 0 points.
Suppose a buyer with a valuation of 15 makes a Bid of 10. Suppose a seller with a cost of 5 has already put in an Ask of 8. Since the Ask is less than the Bid, a trade takes place at a price of 10. Then, the buyer's profit will be his valuation minus the price, or 15-10=5; and the seller's profit will be the difference between the price and their cost, or 10-5=5.
Suppose a buyer with a valuation of 15 makes a Bid of 10. Suppose there are two sellers with a cost of 5 that have already put in identical Asks of 8. Since the Asks are less than the Bid, a trade takes place at a price of 10, however only one of the two sellers will actually make the trade. Which seller makes the trade is determined through a random process. From the trade, the buyer's profit will be his valuation minus the price, or 15-10=5; and the seller who made the trade will profit the difference between the price and their cost, or 10-5=5; while the other seller will earn 0 in profit, but still be able to make a trade later in the period.
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