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Pit_Auction_instructions_2009

# Pit_Auction_instructions_2009 - must negotiate with a...

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Instructions This experiment consists of a number of rounds each lasting 3 minutes. 1. The class is divided into an equal number of buyers and sellers. 2. Each seller possesses one unit of production. Each buyer may purchase up to one unit. 3. At the beginning of each period, each seller receives a WHITE card. The number indicated on the card is the seller’s cost of production. You can think of this as the price that you pay for the good that you are trying to sell. This number is the lowest price at which s/he is willing and able to sell his unit. 4. Each buyer receives a BLUE card. The number written on the card is the buyer’s resale value if s/he purchases one unit. That is, this number is the maximum price s/he is willing to pay for this unit. 5. A participant’s card is private information and should not be revealed to other participants. 6. Experimental Round: The participants meet in the center of the classroom and negotiate with one another. If you are a seller you must negotiate with a buyer; if you are a buyer, you
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Unformatted text preview: must negotiate with a seller. 7. A seller and a buyer who agree upon a trading price will be considered to have traded. They must turn in (face down) their cards and allow the experimenter to record the details of the transaction. 8. The two participants return to their seats and fill in the details of the transaction on their record sheet. 9. Buyer profits are their resale value minus the transaction price. Seller profits are the difference between the transaction price and their cost. 10. The agreed price from each transaction is written on the blackboard by one of the experimenters. 11. A participant who does not reach an agreement by the end of the round returns his card to one of the experimenters. His profit from that round is zero. 12. At the beginning of each round the experimenter shuffles all of the cards and distributes them randomly to the participants....
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