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Instructions

Welcome and thank you for participating in this decision-making experiment. Please make all decisions on your own without consulting or discussing the experiment with anyone else. At the end of today's session, you will be paid a show-up fee, plus any additional earnings based on the decisions you make and some random factors. Please read the instructions carefully. Your responses and decisions in this study will be used anonymously for research purposes only.

In this experiment, three participants form a group. Two participants, a buyer and a seller, negotiate over the price of a fictional product. However, they do not know the exact value of the product. They only have a rough idea: they know that the value can be any integer between 100 and 400 lab points. (Unless stated otherwise, monetary amounts in these instructions will be expressed in lab points rather than in dollars. The conversion rate between lab points and dollars will be provided shortly).

There is also a third party involved in this transaction, "an expert". You can think of the expert as someone who has better information about the true worth of the product.

Specifically, while the buyer and seller only know the broad range (100 to 400 lab points), the expert observes a much narrower range of possible values. This narrow range always has a width of 10 and consists only of consecutive integer values. The center or midpoint of this narrow 10-unit range is randomly drawn, with equal probability, from the numbers between 105 and 395. As a result, the narrow range always lies entirely within the overall bounds of 100 to 400.

For example, the expert may observe that the product's value lies between 120 and 130, or between 272 and 282. Thus, compared to the buyer and the seller, the expert has more precise information about the product's value. Importantly, this narrow range is accurate: the product's actual value will always be an integer drawn at random (with equal probability) from the range observed by the expert.

Although the detailed procedures of the experiment will be explained shortly, the basic idea is as follows. The buyer and the seller know only that the value of the product is between 100 and 400 lab points. They begin negotiating with only this information. If they fail to reach an agreement, only the buyer gets the opportunity to invite the expert for an appraisal. Inviting the expert costs the buyer 5 lab points each time the expert is invited. When invited, the expert observes the narrow range from which the product's value will be drawn and submits an appraisal that is revealed to the buyer and seller. After this, the buyer and the seller are given another opportunity to negotiate. And, finally, after the negotiations between the buyer and seller have concluded, whether successful or not, the value of the product is realized and shown to the buyer and seller.

Please note that your role in the experiment—buyer, seller, or expert—will be revealed to you later.

It is important to understand the following:

  1. The actual integer value of the product is drawn randomly from the narrow range that only the expert observes.
  2. The buyer and seller both know that such a narrow range exists and that its width is always 10.
  3. However, they do not see the narrow range itself — only the expert sees it.
  4. Even if the expert is not invited, the value of the fictional product is still drawn from the same narrow 10-point range observed by the expert. In this case, no appraisal is provided or revealed to the buyer or the seller.
  5. Regardless of the narrow range observed by the expert, experts can report any appraisal between 100 and 400.
  6. Experts do not get to see how buyers and sellers bargain. In other words, they do not see what amounts buyers and sellers offer to each other.

Payoffs

If a deal is made, the buyer earns the realized value of the product minus the negotiated amount (which is paid to the seller) minus 5 if the buyer invited the expert, plus a constant of 75. In short,

The seller's payoff is simply the negotiated amount, which they receive from the buyer.

Seller's payoff = Amount received from the buyer.

If a deal is NOT made, the buyer earns a constant of 75 minus 5 if they invited the expert. Namely,

The seller earns the value of the product minus a constant of 100.

The expert's earnings are solely determined by whether they are invited to provide an appraisal. In particular,

Expert's payoff: 5 each time they are invited by the buyer (0 if not invited).

Situation Buyer payoff Seller payoff Expert payoff
Deal is made, expert invited realized value − negotiated amount − 5 + 75 negotiated amount 5
Deal is made, expert not invited realized value − negotiated amount + 75 negotiated amount 0
No deal, expert invited 75-5=70 realized value − 100 5
No deal, expert not invited 75 realized value − 100 0

Although the expert's fee may appear small relative to the buyer's and seller's payoffs, when converted into real monetary payments, the experiment has been calibrated so that expected earnings are comparable across roles.

All earnings accumulated during the experiment will be converted into Canadian dollars according to these rates and paid to you at the end of the session. There are two additional avenues to make money in this experiment (i.e., answering knowledge-check questions and a show-up fee); details on this will be provided shortly.

Note: The value of the product is unknown to all parties, except after agreement has been reached.

Here are some examples:

Example 1

The buyer and seller know that the product's value lies between 100 and 400 (this is always the case).

After bargaining, they fail to reach an agreement, so the buyer invites the expert.

The expert observes that the value will be drawn from 276 to 286 and reports an appraisal of 280. Recall that the buyer and seller do not know this range of 276 to 286, and observe only the appraisal of 280.

After seeing the appraisal, the buyer and seller negotiate and agree on an amount of 200 (strike a deal).

The product's actual value is then realized from 276 to 286; in this case, it is 285 (each number in the range is equally likely).

Buyer's payoff = 285 − 200 − 5 + 75 = 155 lab points.

Seller's payoff = 200 lab points.

Expert's payoff = 5 lab points.

Example 2

The buyer and seller know that the product's value lies between 100 and 400 (this is always the case).

After bargaining, they fail to reach an agreement, so the buyer invited the expert.

The expert observes that the value will be drawn from 204 to 214 and reports an appraisal of 156. Recall that the buyer and seller do not know this range of 204 to 214, and observe only the appraisal of 156.

Even after seeing the appraisal, the buyer and seller fail to reach an agreement (did not strike a deal).

The product's value is then realized from 204 to 214; in this case, it is 209 (each number in the range is equally likely).

Buyer's payoff = 75 − 5 = 70 lab points.

Seller's payoff = 209 − 100 = 109 lab points.

Expert's payoff = 5 lab points.

Example 3

The buyer and seller know that the product's value lies between 100 and 400 (this is always the case).

After bargaining, they fail to reach an agreement, so the buyer invites the expert.

The expert observes that the value will be drawn from 304 to 314 and reports an appraisal of 335. Recall that the buyer and seller do not know this range of 304 to 314, and observe only the appraisal of 335.

After seeing the appraisal, the buyer and seller negotiate and agree on an amount of 200 (strike a deal).

The product's value is then realized from 304 to 314; in this case, it is 314 (each number in the range is equally likely)

Buyer's payoff = 314 −200 − 5 + 75 = 184 lab points

Seller's payoff = 200 lab points.

Expert's payoff = 5 lab points.

Example 4

The buyer and seller know that the product's value lies between 100 and 400 (this is always the case).

They successfully negotiate and agree on an amount of 170 (strike a deal). Thus, the expert is not invited.

The product's value is drawn from a narrow range of width 10, for example, from 113 to 123; in this case, it is realized to be 118.

Buyer's payoff = 118 − 170 − 0 + 75 = 23 lab points.

Seller's payoff = 170 lab points.

Expert's payoff = 0 lab points.

The Experiment

In this experiment, you will be assigned one of three roles: buyer, seller, or expert. Your role will be revealed to you shortly.

Each round follows a simple structure:

The buyer and seller negotiate using a slider. See the slider screenshot below.

Blue one is the buyer and red one is the seller.

At the start of bargaining:

Both participants can freely adjust their positions during the bargaining period by entering their offer in the box directly underneath the slider.

To reach the seller, the buyer must submit progressively higher offers, which move their (blue) slider rightward. Conversely, the seller must submit progressively lower offers, which move their (red) slider leftward.

👉 If the buyer's position reaches or exceeds the seller's position, a deal is made.
👉 The negotiated amount paid to the seller is the amount at which they meet.

Bargaining screen

During the first 45 seconds (of the 90-second Bargaining Phase), the buyer has the option to invite the expert at any time by pressing a button.

If the buyer invites the expert:

👉 The expert's appraisal is just information about value, not a recommended negotiated amount.

Bargaining simply continues for the full 90 seconds
No appraisal is shown
The option to invite the expert disappears
Bargaining continues normally until the end of the 90 seconds

The product's true value is realized from the expert's 10-point range. And, payoffs are realized according to the payoff table shown earlier.

You will play this game for 20 rounds.
The same rules apply in every round.
In each round, the product's value is randomly determined.
The buyer and expert remain paired together for all 20 rounds.
The seller is randomly matched each round, so the seller you face may change.

Note: There are equal numbers of buyers, sellers and experts in this session

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