Appendix A. Instructions for Treatment NEUTRAL FRAME
Welcome to the experiment
You can earn money in this experiment and the amount that you earn depends on your choices and those of the other participants.
Read these instructions carefully and if you have any questions, please raise your hand and wait for the experimenter to come to your seat. Do not talk during this experiment with anyone other than the experimenter.
Today’s session has 4 Parts:
Part 1 (Instructions):
You are given paper instructions to read and a short oral summary will be made by the experimenter. You will be asked to answer a few questions to check you understood the instructions.
Part 2 (Experiment):
A market experiment that has 20 periods.
Part 3 (Questionnaire):
Once all participants have finished, there will be a short questionnaire about you and today’s session.
Part 4 (Earnings):
After the questionnaire, the experimenter conducting today’s session will pay you in private the earnings from the decisions you’ve made, in cash. The currency unit in this experiment will be in points and at the end of the session points will be converted to pounds (£) at the following exchange rate: 100 points = £1.75.
You will be asked to sign a receipt for your earnings. Please remain seated for this to ensure privacy. All the decisions you make and your earnings will be private and anonymous.
What is this experiment about?
At the beginning of today’s experiment each participant will be assigned a role: Buyer or Producer. The roles will remain the same throughout the experiment. Each participant will make their decisions in a group of 3 Producers and 3 Buyers, which will remain fixed throughout the session. Since all your decisions are anonymous, you will not learn with whom you interacted today.
Rules of the market experiment
In each market, in each period, fictitious goods will be traded. There are two types of goods available to be produced, Type A and Type B. Each producer will choose one type, propose a price and will be able to sell up to three units. Each buyer decides from whom to buy one unit.
There are two types of goods which differ in their production costs and the fact that during production they may cause negative impacts on the earnings of buyers in the group:
Type A: is more costly to produce (50 points) but does not cause any negative impact on buyers;
Type B: is less costly to produce (40 points) but if a buyer chooses it, it causes a negative impact on the earnings of the other two buyers in the group (10 points each).
Procedure for this experiment in each period:
Each group is formed of Producers 1, 2 and 3 and Buyers 1, 2 and 3.
1- Producers announce their price and product type
Producers can choose from two types of goods when making their proposals.
In the beginning of each period, each Producer announces:
-the type of good (A or B)
-the price (s)he will charge per unit sold (this can be any integer from 0 to 110)
These are proposals, and only if buyers agree to buy, do they become effective in terms of earnings, production costs, prices and negative impact on buyers.
2- Buyer makes an order
The Buyer learns the price and type for each Producer in his/her group. The Buyer can order 1 unit and decides from which Producer to buy.
The Buyer can choose not to buy a unit in any given period.
3- Earnings are calculated by the computer:
The computer receives the orders of the buyer and executes the production accordingly.
At the end of each period, earnings for the Producers and Buyers are calculated, according to the following rules:
Producers:
If a Producer does not sell anything, his earnings for that period are Zero.
If a Producer sells something, he receives the unit price minus the production cost per unit sold.
This is multiplied by the number of units sold (which can be 1, 2 or 3). The maximum price a Producer can announce is 110 points.
Earnings of a Producer = (Price − Production cost) * Number of units of the good sold
At the beginning of the experiment each Producer will be given a fixed amount of 400 points. Any gains or losses the Producer makes per period are added or subtracted to this amount.
Buyers:
At the beginning of each period, each Buyer will be given a fixed amount of 20 points (corresponding to a total of 400 points).
In each period, one unit of good the buyer buys is worth 100 points to him/ her.
Earnings = 20 points + 100 points − price paid −negative impact caused by purchases of other buyers*
Earnings = 20 points − negative impact caused by purchases of other buyers*
* If other buyers buy Type B goods.
At the end of today’s experiment, the earnings from the 20 periods are summed and converted into pounds.
Before you proceed to the experiment, please let the experimenter know you have read the instructions, by raising your hand.
You will be asked to answer some quick questions to check if the instructions were clear to you.
Appendix B. Instructions for Treatment ENVIRONMENTAL FRAME
Welcome to the experiment
You can earn money in this experiment and the amount that you earn depends on your choices and those of the other participants.
Read these instructions carefully and if you have any questions, please raise your hand and wait for the experimenter to come to your seat. Do not talk during this experiment with anyone other than the experimenter.
Today’s session has 4 Parts:
Part 1 (Instructions):
You are given paper instructions to read and a short oral summary will be made by the experimenter. You will be asked to answer a few questions to check you understood the instructions.
Part 2 (Experiment):
A market experiment that has 20 periods.
Part 3 (Questionnaire):
Once all participants have finished, there will be a short questionnaire about you and today’s session.
Part 4 (Earnings):
After the questionnaire, the experimenter conducting today’s session will pay you in private the earnings from the decisions you’ve made, in cash. The currency unit in this experiment will be in points and at the end of the session points will be converted to pounds (£) at the following exchange rate: 100 points = £1.75.
You will be asked to sign a receipt for your earnings. Please remain seated for this to ensure privacy. All the decisions you make and your earnings will be private and anonymous.
What is this experiment about?
At the beginning of today’s experiment each participant will be assigned a role: Buyer or Producer. The roles will remain the same throughout the experiment. Each participant will make their decisions in a group of 3 Producers and 3 Buyers, which will remain fixed throughout the session. Since all your decisions are anonymous, you will not learn with whom you interacted today.
Rules of the market experiment
In each market, in each period, fictitious goods will be traded. There are two types of goods available to be produced, Green Goods and Brown Goods. Each producer will choose one type, propose a price and will be able to sell up to three units. Each buyer decides from whom to buy one unit.
The two types of goods in this market have identical characteristics, in terms of quality and performance, therefore are worth the same for consumers. However, the two goods differ in their production costs because of the technology used: either cleaner and more expensive technologies or polluting and cheaper techniques. Brown Goods are cheaper to produce but impact negatively the environment through pollution and waste generation, which in turn has a negative effect on other individuals in society (due to health problems caused by pollution, for instance, or the adverse effects caused by the loss of environmental quality). For that reason, in this experiment, when a Brown Good is purchased, the earnings of the other buyers in a group are negatively affected. Green goods have higher production costs, but since they do not harm the environment, there is no negative impact on the other buyers in the group.
Procedure for this experiment in each period:
Each group is formed of Producers 1, 2 and 3 and Buyers 1, 2 and 3.
1- Producers announce their price and product type
Producers can choose from two types of goods when making their proposals.
In the beginning of each period, each Producer announces:
-the type of good (Green or Brown)
-the price (s)he will charge per unit sold (this can be any integer from 0 to 110)
These are proposals, and only if buyers agree to buy, do they become effective in terms of earnings, production costs, prices and negative impact on the environment and on buyers.
2- Buyer makes an order
The Buyer learns the price and type for each Producer in his/her group. The Buyer can order 1 unit and decides from which Producer to buy.
The Buyer can choose not to buy a unit in any given period.
3- Earnings are calculated by the computer:
The computer receives the orders of the buyer and executes the production accordingly.
At the end of each period, earnings for the Producers and Buyers are calculated, according to the following rules:
Producers:
If a Producer does not sell anything, his earnings for that period are Zero.
If a Producer sells something, he receives the unit price minus the production cost per unit sold.
This is multiplied by the number of units sold (which can be 1, 2 or 3). The maximum price a Producer can announce is 110 points.
Earnings of a Producer = (Price − Production cost) * Number of units of the good sold
At the beginning of the experiment each Producer will be given a fixed amount of 400 points. Any gains or losses the Producer makes per period are added or subtracted to this amount.
Buyers:
At the beginning of each period, each Buyer will be given a fixed amount of 20 points (corresponding to a total of 400 points).
In each period, one unit of good the buyer buys is worth 100 points to him/ her.
Earnings = 20 points + 100 points − price paid −negative impact caused by purchases of other buyers*.
Earnings = 20 points − negative impact caused by purchases of other buyers*.
* If other buyers buy Brown goods, the buyer knows for sure how much impact the purchases have on his/her payments (−10 points per unit)—this information is revealed at the end of each period.
At the end of today’s experiment, the earnings from the 20 periods are summed and converted into pounds.
Before you proceed to the experiment, please let the experimenter know you have read the instructions, by raising your hand.
You will be asked to answer some quick questions to check if the instructions were clear to you.