Welcome to the experiment. Please read these instructions carefully. There will be a quiz around
the end of the instructions, to make sure you understand this experiment. The payment you will
receive from this experiment depends on your decisions.
Your Role and Match
At the beginning of the experiment, one-half of the participants will be randomly assigned to the
role of a seller and the other half the role of a buyer. Your role will remain fixed throughout the
experiment.
The experiment consists of {{ tot_matches }} matches. At the beginning of each match, one seller participant
and one buyer participant are randomly paired. The pair is fixed within the match. After each
match, participants will be reshuffled to form new pairs. You will not learn the identity of the
participant you are paired with, nor will that participant learn your identity even after the end of
the experiment.
In each match, the seller holds an asset. The value of the asset is 0 for the seller. However, the
buyer has a strictly positive value of the asset. Let B denote the buyer's value of the asset. At the
beginning of a match, a computer randomly and independently draws B between 50 and 400. Every
integer in [50, 400] has an equal chance to be drawn. The value B is fixed within each match, and a
new B is independently drawn for a new match. The buyer knows the value B, but the seller does not.
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Tab 2
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Your Decisions in Each Match
Each match consists of at least one round of bargaining. In a round, a seller offers a price to sell
the asset, and the buyer responds. If the offer is rejected, the match may move on to the next round
of bargaining. The details follow.
Your Task as a Buyer:
Suppose your role is a buyer. At the beginning of Round 1, you will see
the following figure. The horizontal position of the dark blue line represents B, your value of the
asset. (B is 330 in this example, but your value will vary.) Once the seller in your pair makes a price
offer, p, a red vertical arrow will appear on the figure. The position of the red arrow represents p.
After that, decide whether to
accept the offer and earn (B − p),
reject it and move on to the next round with an 80% chance, or
{% if outside_option > 0 %}
take an outside option to earn {{ outside_option }} tokens.
{% endif %}
0
50
Seller's Offer: p
Value B: 330
400
Figure 1: Buyer's Screen in Each Round
Your task is the same for every round. It is important to understand that when you reject the
offer, there is a 20% chance that the match is terminated, and both of you and the seller
in your pair earn 0 tokens.
Beware that you cannot accept the offered price p if it is strictly greater than your value B, otherwise
your payoff becomes negative.
Your Task as a Seller:
Suppose your role is a seller. At the beginning of Round 1, you will see the following figure.
The blue shaded area between 50 and 400 represents the range of all possible buyer's values.
p
0
50
Your Price Offer in this Round
400
Figure 2: Seller's Screen: Round 1
Choose your price offer by clicking on the line. A red vertical arrow, whose position represents
your price offer, p, will move to the point you click. You are free to choose any point in the range
[0, 400] for your price offer, and you can adjust it as much as you wish. After that, click the submit
button, and wait for the buyer's decision. You expect one of {% if outside_option > 0 %}three {% endif %}{% if outside_option == 0 %}two {% endif %}
possible outcomes.
If the buyer accepts the offer, you earn p tokens.
{% if outside_option > 0 %}
If the buyer takes an outside option, you earn 0 tokens.
{% endif %}
If the buyer rejects the offer, then the match moves to Round 2 with an 80% chance. Note
that if the match is terminated with a 20% chance, both you and the buyer earn 0 tokens.
If the match moves to Round 2 and beyond, then you will see the following figure below. The red
vertical arrow represents your (rejected) previous offer.
Before submitting a new offer price, adjust an orange slider and a purple slider to indicate the updated range of
possible values B in your mind. The reported range will appear in your decision screen but
will not be shared with the buyer. Its sole objective is to help you think about an appropriate
price offer. There is nothing to gain by indicating a range that differs from what you actually believe,
so please report your belief as accurately as possible. To indicate the range, move the orange and purple sliders.
p
0
50
Min: 50
Max: 400
Your previous offer
400
(a) Before
p
0
50
Min: 90
Max: 330
Your previous offer
400
(b) After
Figure 3: Reporting Beliefs in Round n
The horizontal positions of the sliders respectively represent the minimum and the maximum
of the range in your mind. The minimum can't exceed the maximum.
Note that the buyer's value of the asset (B)
{% if outside_option > 0 %}
and the value of the outside option ({{ outside_option }} tokens)
{% endif %}
will
remain the same across rounds within a match.
Probability of Match Termination
As described, after a buyer rejected a price offer, the match continues to the next round with 80%
chance. Your screen presents a spinning wheel that consists of red area (20%) and green area (80%)
as illustrated below. Once you click the "Spin" button, the wheel starts spinning. If the spinning
wheel stops at the green area, the match continues. Otherwise, the match terminates. Note that the
seller and buyer in the same match always see the same outcome from the wheel for each
round.
Figure 4: Spinning Wheel
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{#
Round
> 1
> 2
> 3
> 4
> 5
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{#
> 6
> 7
> 8
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{#
Probability
80%
64%
51%
41%
33%
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{#
26%
21%
< 20%
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{#
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{#
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{# The table reads, for example, that the probability that the match goes beyond round 2 is 64%, while#}
{# the probability that the match goes beyond round 8 is less than 20%.#}
{#
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Information Feedback
At the end of each round, you will know the seller's price offer and the buyer's decision. If
the buyer rejects the offer, you will know whether the match is continued to the next round or terminated.
At the end of each match, you will know how many tokens you receive from the match.
Your Monetary Payments
At the end of the experiment, a computer will randomly select one match out of {{ tot_matches }} for your
payment. Every match has an equal chance to be selected for your payment, so it is in your best
interest to take each match equally seriously. Participants will receive the amounts of tokens according
to the outcome from the selected match with the exchange rate of 1 token = 1 HKD. Also, every
participant will receive a show-up fee of HKD 40.
{#
A Practice Match
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{# The practice match is part of the instructions and is not relevant to your payment. Its objective#}
{# is to get you familiar with the computer interface and the flow of the decisions in each round of a#}
{# match. Once the practice match is over, the computer will tell you, "The official matches begin now!"#}
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Completion of the Experiment
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{# After the 10th match, the experiment will be over. You will be instructed to fill in the receipt for your#}
{# payment. The amount you earn will be paid electronically via the HKUST Autopay System to the bank account#}
{# you provide to the Student Information System (SIS). The Finance Office of HKUST will arrange the auto-payment.#}
{# An email notification will be sent to your HKUST email address on the pay date under the name of the sender "FOPSAP"#}
{# (Finance Ofiice Payment System Auto Payment).#}
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Comprehension Check
To ensure your comprehension of the instructions, you will answer four multiple-choice questions.
You can proceed only with all correct answers. Afterwards, you will participate in a practice match.
Question 1
{% formfield player.q1 label = "Suppose you are a seller. Which of the followings is NOT TRUE?"%}
In each match, the buyer’s value of the asset is the private information of the buyer.
{% if outside_option > 0 %}
If the buyer takes the outside option, the buyer receives {{ outside_option }} tokens, and the seller receives 0 tokens.
{% endif %}
If the buyer accepts the offer p from the seller, the seller receives p tokens.
If the buyer rejects the seller’s offer, with a 20% chance the match terminates, and with an 80% chance the match moves on to the next round.
{% if outside_option == 0 %}
In case that the match moves on to the next round, the seller makes a new offer.
{% endif %}
Question 2
{% formfield player.q2 label = "Suppose you are a buyer, and the value of the asset is 300. Which of the followings is TRUE?" %}
If the buyer whose asset value is B accepts a price offer p, he earns (B-p) tokens.
{% if outside_option > 0 %}
If the buyer takes the outside option, the buyer receives {{ outside_option }} tokens, and the seller receives 0 tokens.
{% endif %}
The buyer’s value of the asset is fixed within each match and does not vary across rounds.
{% if outside_option == 0 %}
If the buyer rejects the seller’s offer, with a 20% chance the match terminates, and with an 80% chance the match moves on to the next round.
In case that the match moves on to the next round, the seller makes a new offer.
{% endif %}
Question 3
{% formfield player.q3 label = "Suppose the price offer in Round 1 is rejected. Which of the followings CAN HAPPEN?"%}
If the buyer rejects the seller’s offer, with a 20% chance the match terminates, and with an 80% chance the match moves on to the next round.
When the match terminates, both the seller and the buyer receive 0 tokens.
Question 4
{% formfield player.q4 label = "Suppose the first match is done. Which of the followings is TRUE?"%}
Your role is randomly determined at the beginning of the experiment and fixed throughout the experiment.
In each match, one seller participant and one receiver participant are randomly paired. After each match, participants are reshuffled to form new pairs.
For each match, the buyer’s value of the asset is randomly determined, but the value is fixed within the match.