Appendix
Instructions to subjects
Instructions
In this experiment you will make decisions to trade one unit of a commodity. Some of you will
be buyers and some of you will be sellers. Trading will occur in a sequence of periods. You will
remain in the same assignment (as a buyer or seller) throughout the experiment. The prices at
which you are able to trade in each trading period will determine your earnings in francs
(experimental currency) which will be converted to US dollars at a specified exchange rate. The
exchange rates each period will be displayed on your screen. It may or may not be different for
different periods and across the participants. You should keep track of your exchange rate each
period and your franc earnings each period. At the end of the experiment, you will be paid the
total of the dollar earnings that you have earned each period. You will be given a complete
description about trading using the software in a moment and will have enough time to get used
to the trading interface when we conduct the practice period.
If you have any question, please raise your hand and we will come and assist you.
Buyer-specific instructions
You have a private market where you can sell a unit of the commodity (to the experimenter) at a
certain price. You will start out with no unit of the commodity but, some endowment of francs
that will let you buy a unit in the public market at a certain price and re-sell it to the experimenter
through your private market. The endowment of francs will be taken away at the end of a period.
You earn the difference in the price at which you sell in your private market and the price at
which you are able to buy the unit from the public market. If you do nothing, you earn nothing.
Seller-specific instructions
You start out with 1 unit of the commodity and some endowment of francs. You need to sell the
unit in the public market at a certain price and then go to your private market and buy from the
experimenter so that you again end up with 1 unit of the commodity before the trading period
terminates. The endowment of francs will be taken away at the end of a period. You earn the
difference in the price at which you are able to sell in the public market and the price at which
you buy from the private market. If you do nothing, you earn nothing.
1
Table A1. Average trading time (in seconds) for the different types (data from all 48 periods
included).
Type
Hp
Mp
Lp
High exchange rate (R)
81.26
118.98
160.20
Low exchange rate (r)
72.66
137.01
162.33
Table A2. Average act time (in seconds) for the different types (all from all 48 periods
included).
Type
Hp
Mp
Lp
High exchange rate (R)
76.95
93.71
116.31
2
Low exchange rate (r)
68.86
97.13
109.60