INSTRUCTIONS FOR PARTICIPANTS

[Start reading INSTRUCTIONS distributed to subjects].

You are about to participate in an experiment in the economics of decision-making.
If you follow the instructions closely and make appropriate choices, you may make an appreciable amount of money.
At the end of the experiment, your earnings and an initial endowment of $___ will be paid to you in cash. We have taken
pains to insure that no one - including the experimenters - will know which choices you make and how much money you
earn. Anonymity is very important to us in this experiment. In fact, at the end of the experiment, we will ask you to
comment on aspects of our design that compromise or could compromise anonymity. We will pay $3 to everyone who
can help us improve our design.

Are there any questions at this point? This is a scientific experiment. As part of the scientific method in this experiment,
it is important that you remain silent and do not look at other people’s work. If you have any questions or need assistance
of any kind, please raise your hand and I will come to you. If you talk, laugh, sigh, exclaim out loud, or make noises of
any kind, you will be asked to leave the experiment, and you will not be paid. I expect and appreciate your cooperation.

The Rules of the Game:

The experiment consists of 7 rounds. In each round, you will be matched with a different participant whose identity
will not be revealed to you. By the same token, your identity will not be revealed to the other participant. You will be
matched only once with each participant.

At the beginning of each round, you and the other participant will be asked to choose between option 1 and option 2
based on a payment schedule of the following type:

[Read very slowly.] In the schedule above, for example, if you choose option 2, you can move along the row labeled
option 2 to see that you could either earn 15 or 5, depending on the other participant’s choice. Assume that the other
participant chooses option 1. Then you can move down the column labeled option 1 to determine your actual earnings.
In this example, your earnings would be 15 and the other participant’s earnings would be 0. Note that the actual payment
schedule you will be given in the experiment will differ from the one above. Also, the schedule will vary throughout the
experiment. (In one of the schedules, you may incur losses which will be subtracted from your initial endowment if you should
not earn enough to cover them.)

Please answer the following questions based on the payment schedule above. Look up when you are done and I will come to your table to check your answers [Give subjects time to
answer questions. Then make rounds to check the answers]:

In order to guarantee that you will be matched with a different participant in each round, we will assign an identification
letter to each of you. Please refer to the following identification table to determine the participant with whom you are
matched in a specific round:

[Read very slowly.] The letters on this table refer to the identification letters and the numbers refer to the rounds.
For example, if your identification letter is F and you want to determine the participant you are matched with in the first
round, you proceed as follows: Go to row F and move along the row until you get to number 1. Then move up in this
column and read off the identification letter of the participant with whom you will be paired in the first round. In this
example, you would be paired with participant D. Note that in the actual experiment you will only see the row with your
identification letter. You may convince yourself at this point that everybody will be matched only once with each other
participant.

Please answer the following questions based on the table above. Look up when you are done and I will come to your
table and check your answers. [Give subjects time to answer the questions and then make rounds to check the answers].

Are there any questions? We will now begin with the experiment. Whenever you are done with an activity, please look up
so that I can see that you are ready. [Repeat the previous sentence as often as necessary. End of written instructions].

[Make sure that all subjects pay attention to you before you continue reading the instructions.
Remember that from now on they have no written copy anymore.]

Because anonymity is of great importance to us in this experiment, you will draw an envelope that contains your
identification letter. [Show the envelopes. Let one participant mix up the envelopes.]. The envelope also contains
the portion of the identification table in the instructions that you will need to determine the participant with whom you are
matched in each round, as well as a stack of decision sheets with your identification letter on one side.

Once you know your identification letter, please write it down on the record sheet that you will find on your table. Make
sure that neither your identification letter, nor your portion of the identification table, nor your decision sheets, nor the
record sheet are visible to anyone at any time during the experiment. [Chairs or tables should be far enough apart so that
subjects are assured that nobody else can see their record sheet.] An experimenter will now come to each of you so that
you can draw an envelope. Please make sure that your envelope contains an identification letter, your portion of the
identification table and a stack of decision sheets marked with the identification letter. [Go around and let each person
draw an envelope. Give subjects time to check the contents of the envelope and to mark their record sheets.]

You may convince yourself that your portion of the identification table is identical to the corresponding row of the
complete identification table in the instructions. [Give subjects time to check their portion of the identification table.]
The experimenter will now go around with a trash can so that you can dispose of the instructions and the identification
letters. Please make sure that you keep the envelope, your portion of the identification table, the stack of decision sheets,
the record sheet, the comment sheet and the pen as you will need them later. Dispose only of the instructions and the
identification letter. [Go around with a trash can to collect the instructions and the identification letters. Make sure that
subjects only throw away these items, not the identification table or anything else.]

Please look at your record sheet again. You will find four different questions that I ask you to answer at this point.
[Give subjects time to answer the questions].

List of Steps for Each Round of the Experiment:

1. {We will use two different payment schedules in this experiment. The appropriate schedule will be drawn on the board
(or pointed out) at the beginning of each round.} [Draw schedule ___ on the board]. This will be the payment schedule for
round ___. {Note that the numbers in the payment schedules correspond to cents. A payment of 300, for example,
denotes 300 cents or three dollars.}

[Schedules will be used in the following order:]

2. Please choose either option 1 or option 2 at this point by using the payment schedule on the board. [Point to schedule
again]. When you have made your decision, {option 1 or option 2}, please write it down on your record sheet under
‘Your Decision’. [Give subjects time to make their decision].

3. Please use your portion of the identification table now to locate the participant with whom you are matched in round ___.
[Show an identification table to subjects so that they know which table you mean]. {Do not try to find the other participant
in the room or communicate to anybody with whom you are matched.} [Give subjects some time to locate the other
participant]. Write down the identification letter of the other participant on your record sheet under ‘Identification letter
of other participant’.

4. Take a piece of paper from your stack of decision sheets. Check off your decision - that is option 1 or option 2 - on the
paper and fold it in half twice so that your identification letter is visible on the outside. [Demonstrate how to check off
option 1 or 2 and how to fold the decision sheets. Give subjects time to follow these instructions]. An experimenter
will now go around to collect the decision sheets in a box. {Please put the decision sheet into the box so that the
experimenter cannot see the identification letter on the decision sheet that you put in.} [Go around to collect the decision
sheets. Collect decision sheets in a different order each round. Shake the box after all decision sheets have been collected.]

5. The experimenter will now go around again. This time, please find the decision sheet that has the identification letter
of the participant with whom you are matched on it, and take it out of the box. When you have the sheet, unfold it and
copy the choice on the inside - that is, 1 or 2 - on your record sheet under ‘Other Participant’s Choice’. [Go around with
the box and let everybody pick out the appropriate paper. Distribute decision sheets in a different order in each round.
Give subjects time to record the other participant’s choice.] Once you have recorded the other participant’s choice, please
put the decision sheet in the envelope in which you received your identification letter. [Give subjects time to follow
these instructions]. By using the payment schedule on the board, you can now compute your earnings for this round.
Please write them down on your record sheet under ‘Your Earnings’. {I ask you to make sure that you record the right
choices and compute your earnings correctly. By comparing the records of the paired participants in each round, we can
determine if mistakes have been made. If this is the case, we will have to recompute earnings and you will have to stay
here longer.} [Give subjects time to compute and record their earnings].

6. [Give subjects time to look at the (new) payment schedule. Repeat steps 1 through 6 for each of the following rounds
leaving out the sentences in parentheses].

7. We are now at the end of the experiment. Please compute your total earnings at this point. [Give subjects time to
compute total earnings.] Please take the decision sheets out of the envelope. An experimenter will go around with a trash
can so that you can dispose of the decision sheets. Please hold on to the envelope. [Go around with a trash can to collect
the decision sheets. Make sure that subjects do not throw away the envelopes.] Write a name or word of your choice
- not your name or identification letter - on the envelope so that you can identify it later. If you are concerned that your
handwriting will reveal your identity, you may want to print this name or word or disguise your handwriting otherwise.
Put your record sheet and only the record sheet in the envelope. The experimenter will now come around with a box.
Please put your envelope into this box. [Give subjects time to follow these instructions. Go around with a box to collect
the envelopes.]. We will take out the envelopes and remove the record sheets. After having ascertained that record sheets
have been filled out correctly, we will put the appropriate payment into each envelope.

8. [Before starting to put payments in envelopes:]. One of our greatest concerns in this experiment is that all choices and
earnings be completely anonymous. While we put the payments into the envelopes, you have the chance to write down any
doubts you have about anonymity in this experiment. If you point out an aspect of our design that compromises or
could compromise anonymity, we will pay you $3. Please use the comment sheets we have provided for you. Write down
your mailing address so that we can get in touch with you if we decide that you have found an aspect of our design that
compromises anonymity. Note that the comment sheets may give away your identity because conceivably we could
compare the handwriting on the record sheets and the comment sheets. If you are concerned about this, you may want
to print your comments or try to disguise your handwriting otherwise. We will collect the comment sheets once we have
put the money into the envelopes.

9. [Put payments in envelopes and put envelopes back into the bowl. Collect comment sheets.] We will leave the room
now. When we have left, you can take your envelope and leave. Do not leave before everybody has their envelope and
throw the identification tables and all other pieces of paper in the trash can on your way out. Leave only the pens on the tables. Please
refrain from talking until you have left the room. Thank you for participating. [Leave the room].

Figure 1a

Figure 1b

Figure 1c

[Read very slowly.] In the schedule above, for example, if you choose

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