General Information
Thank you for being part of our research study of markets. If you read these instructions carefully you may earn a significant amount of experimental dollars to purchase prizes.
Each of you has been randomly assigned to one of two groups: “Buyers” and “Sellers.”
Whether you are a buyer or seller is noted at the top of your record sheet. Before every market period pairs containing exactly one buyer and one seller are formed.
How each Market period Works
1. Each buyer chooses a price for the seller and records the price on the record sheet. A monitor will record the prices and write them on the sellers’ record sheets. Sellers must accept the price they have been assigned.
2. After receiving prices, the sellers each choose an amount of quality to provide and record it on their record sheet. A monitor will record these amounts.
3. The monitor will write the quality provided by the seller on the buyer’s record sheet.
Both buyers and sellers can then compute the earnings for the period.
4. A Buyer will not know the identity of the seller with whom he/she has been paired, and a Seller will not know the identity of the buyer. In addition, communication is not allowed so that all the choices made are only revealed within a buyer-seller pair .
5. Over the course of the session, you will not be matched more than twice with the same person and you will never be paired with the same person for two consecutive periods.
6. Your total earnings for participating in this market will be the sum of the earnings in each of ten market periods.

1. Each buyer begins each period with 10 experimental dollars from which to pay a price to the seller. Buyers determine a price by choosing a number between 1 and 10. The lowest price you can choose is 1, 2 is slightly higher, and so on up to 10, which is the highest amount.
2. The higher the price chosen by the buyer, the better it is for the seller. That is, the higher the number chosen the higher the seller’s income.
3. The higher the price, the higher the cost to the buyer.
4. Buyer’s Income in Experimental Dollars will be determined by the following formula:
Buyer’s Income = (5 X quality provided by the seller) + 10 – price paid
1. Each seller begins each period with 10 experimental dollars from which to provide quality to the buyer. Sellers determine quality by choosing a number between 1 and 10.
The lowest quality is 1, 2 is slightly higher, and so on up to 10, which is the highest amount.
2. The higher the amount of quality chosen by the seller, the better it is for the buyer.
That is, the higher the number chosen the higher the buyer’s income.
3. The higher the amount of quality, the higher the cost to the seller.
4. Seller’s income in Experimental Dollars will be determined by the following formula:
Seller’s Income = (5 X price paid by buyer) + 10 – cost of quality provided

Practice Exercises
Seller’s Income = (5 X Price) + 10 – Quality
Buyer’s Income = (5 X Quality) + 10 – Price
1. Calculate the income for the seller and buyer when a buyer pays a price of 8 to the seller and the seller chooses quality of 2.
Seller’s Income
=__________ Experimental dollars
Buyer’s Income
=__________ Experimental dollars
2. Calculate the income for the seller and buyer when a buyer pays a price of 8 to the seller and the seller chooses quality of 5.
Seller’s Income
=__________ Experimental dollars
Buyer’s Income
=__________ Experimental dollars
3. Calculate the income for the seller and buyer when a buyer pays a price of 2 to the seller and the seller chooses quality of 8.
Seller’s Income
Buyer’s Income
=__________ Experimental dollars
=__________ Experimental dollars
4. Calculate the income for the seller and buyer when a buyer pays a price of 2 to the seller and the seller chooses quality of 1.
Seller’s Income
Buyer’s Income
=__________ Experimental dollars
=__________ Experimental dollars
Summary
A. Buyer chooses a Price from 1-10
B. Seller receives the Price and Chooses a Quality from 1-10
C. Buyer receives the Quality and the market period ends
During the experiment your income will be calculated in “Experimental dollars,” which can be used to purchase items.
Are there any questions?

ID#____________
Seller’s Income = (5 X Price) + 10 – Quality
Period 1
Price ____________ Your Amount of quality _____________
Your earnings for Period 1 __________
Period 2
Price ____________ Your Amount of quality _____________
Your earnings for Period 2 __________
Period 3
Price ____________ Your Amount of quality _____________
Your earnings for Period 3 __________
Period 4
Price ____________ Your Amount of quality _____________
Your earnings for Period 4 __________
Period 5
Price ____________ Your Amount of quality _____________
Your earnings for Period 5 __________
Period 6
Price ____________ Your Amount of quality _____________
Your earnings for Period 6 __________
Period 7
Price ____________ Your Amount of quality _____________
Your earnings for Period 7 __________

Seller’s Income = (5 X Price) + 10 – Quality
Period 8
Price ____________
ID#__________
Your Amount of quality _____________
Your earnings for Period 8 __________
Period 9
Price ____________ Your Amount of quality _____________
Your earnings for Period 9 __________
Period 10
Price ____________ Your Amount of quality _____________
Your earnings for Period 10 __________

ID#____________
Buyer’s Income = (5 X Quality) + 10 – Price
Period 1
Price Paid ____________ Amount of quality _____________
Your earnings for Period 1 __________
Period 2
Price Paid ____________ Amount of quality _____________
Your earnings for Period 2 __________
Period 3
Price Paid ____________ Amount of quality _____________
Your earnings for Period 3 __________
Period 4
Price Paid ____________ Amount of quality _____________
Your earnings for Period 4 __________
Period 5
Price Paid ____________ Amount of quality _____________
Your earnings for Period 5 __________
Period 6
Price Paid ____________ Amount of quality _____________
Your earnings for Period 6 __________
Period 7
Price Paid ____________ Amount of quality _____________
Your earnings for Period 7 __________

ID#____________
Buyer’s Income = (5 X Quality) + 10 – Price
Period 8
Price Paid ____________ Amount of quality _____________
Your earnings for Period 8 __________
Period 9
Price Paid ____________ Amount of quality _____________
Your earnings for Period 9 __________
Period 10
Price Paid ____________ Amount of quality _____________
Your earnings for Period 10 __________