Randomizing Endowments: An Experimental Study of Rational
Expectations and Reference-Dependent Preferences
By
ANNETTE CERULLI-HARMS and LORENZ GOETTE and CHARLES
SPRENGER
Online appendix
Seat Plans
In the following you may find two seating plans. One for the primary exper-
iment in a large auditorium and of an exemplary laboratory session. Roles
and probability conditions are displayed accordingly.
1
Seat Plans and Randomization of Probability Conditions
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Buyers
Sellers
Buyers
Primary Experiment
Sellers
Laboratory Sessions
Translated Instructions
3
!
!
!
!
!
Primary Experiment
–
Buyers
Before passing on to the exercise session, you will participate in an experiment.
Please read all instructions given on this page attentively.
From now on, it
is strictly forbidden to talk to your colleagues.
It is important for
the good course of the experiment that you respect this rule.
If you have a question,
please raise your hand to address one of the assistants. If you do not respect this rule,
we have to exclude you from the experiment.
A.
What is it
about
?
You now have 10CHF at your
disposal
for this experiment. This money is yours.
You can use all or part of this mon
ey to buy an UNIL mug, like the ones
half of the
p
articipants have (you may
also
see one
on the projector).
On the next page, you will
need to indicate at which price you are willing to buy an UNIL mug. At the same time,
the participants that have a mug will indicate at which price they are willing to sell it.
We will use your choice and the choices of the other participants to determi
ne the market
supply and demand curves. The market price will be determined by the intersection of
supply and demand of all buyers and sellers in this market.
How exchanges will be made
:
•
If you chose to buy a mug at the market price, this amount will
be
deducted from your 10CHF and you will receive a mug.
You will equally
receive what is left from your 10CHF.
•
Moreover, a number be
tween 1 and 100 will be randomly drawn
. If this number
lies between 1 and 25, you will be forced to buy a mug at the marke
t price.
This
exchange is mandatory. There is thus a 25% chance that you will be
forced to
buy a
mug at the market price whether this is according to your
indicated choice or not at this price.
The experiment consists of one single round. So, think
carefully about your choice. Keep
in mind that you have all interest to respond in accordance with your preferences as you
do not have any influence on the market price that will later be revealed.
!
!
!
!
!
B.
Decision sheet
This is the course of the experimen
t
:
•
You have 10CHF at your disposal. This money is yours.
You may use all or
part of this money to buy an UNIL mug, like the ones half of the participants have.
•
If you chose to buy a mug at the market price, this amound will be
deducted from your 10CHF and you will receive a mug.
You will equally
receive what is left from your 10CHF.
•
Moreover, a number between 1 and 100 will be randomly drawn. If this number
li
es between 1 and 25, you will be forced to buy a mug at the market price.
This
exchange is mandatory. There is thus a 25% chance that you will be
forced to buy a mug at the market price whether this is according to your
indicated choice or not at this pric
e.
IMPORTANT
:
Mark a choice for
each line
, otherwise your decision sheet will be invalid.
I prefer keeping
my money
I prefer buying
a mug
1
If the market price is
0.50CHF,
...
!
!
2
If the market price is
1CHF,
...
!
!
3
If the market price is
1.50CHF, ...
!
!
4
If the market price is
2CHF, ...
!
!
5
If the market price is
2.50CHF, ...
!
!
6
If the market price is
3CHF, ...
!
!
7
If the market price is
3.50CHF, ...
!
!
8
If the market price is
4CHF, ...
!
!
9
If the market price is
4.50CHF, ...
!
!
10
If the market price is
5CHF, ...
!
!
11
If the market price is
5.50CHF, ...
!
!
12
If the market price is
6CHF, ...
!
!
1
3
If the market price is
6.50CHF, ...
!
!
14
If the market price is
7CHF, ...
!
!
15
If the market price is
7.50CHF, ...
!
!
16
If the market
price is
8CHF, ...
!
!
17
If the market price is
8.50CHF, ...
!
!
18
If the market price is
9CHF, ...
!
!
19
If the market price is
9.50CHF, ...
!
!
20
If the market price is
10CHF, ...
!
!
!
!
!
!
!
!
Primary Experiment
–
Sellers
Before passing on to the exercise session, you will participate in an experiment.
Please read all instructions given on this page attentively.
From now on, it
is strictly forbidden to talk to your colleagues.
It is important for
the good course of the experiment that you respect this rule. If you have a question,
please raise your hand to address one of the assistants. If you do not respect this rule,
we have to exclude you from the experiment.
A.
What is it
about
?
You have received an UNIL mug for this experiment. This mug is yours.
You may
sell your mug for money to one of the participants that did not rec
eive one. On the next
page, you
will need to indicate at which price you are willing to sell your UNIL mug. At
the same time, participants that did not receive a mug will indicate at which price they
are willing to buy a mug.
We will use your choice and the choices of the other partic
ipants to determine the market
supply and demand curves. The market price will be determined by the intersection of
supply and demand of all buyers and sellers in this market.
How exchanges will be made
:
•
If you chose to sell your UNIL mug
at the market
price
, you will receive
this amount in exchange for your mug
that will you then no longer have.
•
Moreover, a number between 1 and 100 will be randomly drawn. If this number
lies between 1 and 25, you will be forced to
sell your
mug at the market price.
This exchange is mandatory. There is thus a 25% chance that you will be
forced to sell the mug at the market price whether this is according to
your indicated choice or not at this price.
The experiment consists of one single round. So, think carefully
about your choice. Keep
in mind that you have all interest to respond in accordance with your preferences as you
do not have any influence on the market price that will later be revealed.
!
!
!
!
!
!
B.
Decision sheet
This is the course of the experiment
:
•
You have received an UNIL mug for this experiment. This mug is yours.
You may sell your mug for money to one of the participants that did not receive
one.
•
If you chose to sell your UNIL mug
at the market price
, you will receive
this amount in exchange for
your mug
that will you then no longer have.
•
Moreover, a number between 1 and 100 will be randomly drawn. If this number
lies between 1 a
nd 25, you will be forced to sell the
mug at the market price.
This
exchange is mandatory. There is thus a 25% chance that you will be
forced to
sell the
mug at the market price whether this is according to
your indicated choice or not at this price.
IMPORTANT
:
Mark a choice for
each line
, otherwise your decision sheet will be invalid.
I prefer keeping
the mug
I prefer selling
the mug
1
If the market price is
0.50CHF, ...
!
!
2
If the market price is
1CHF, ...
!
!
3
If the market price is
1.50CHF, ...
!
!
4
If the market price is
2CHF, ...
!
!
5
If the market price is
2.50CHF, ...
!
!
6
If the market price is
3CHF, ...
!
!
7
If the market price is
3.50CHF, ...
!
!
8
If the market price is
4CHF, ...
!
!
9
If the market price is
4.50CHF, ...
!
!
10
If the market price is
5CHF, ...
!
!
11
If the market price is
5.50CHF, ...
!
!
12
If the market price is
6CHF, ...
!
!
1
3
If the market price is
6.50CHF, ...
!
!
14
If the market price is
7CHF, ...
!
!
15
If the market price is
7.50CHF, ...
!
!
16
If the market price is
8CHF, ...
!
!
17
If the market
price is
8.50CHF, ...
!
!
18
If the market price is
9CHF, ...
!
!
19
If the market price is
9.50CHF, ...
!
!
20
If the market price is
10CHF, ...
!
!
!
!
!
!
!
!
Mechanism First with Random Price
–
Buyers
Please read all instructions given on this page attentively.
From now on, it
is
strictly forbidden to talk to your colleagues.
It is important for
the good course of the experiment that you respect this rule. If you have a question,
please raise your hand to address one of the assistants. If you do not respect this rule,
we have to ex
clude you from the experiment.
A.
What is it about
?
Without counting your show
-
up fee of 10CHF for you
r
participation, you now
have 10CHF at your disposal for this experiment
.
This money is yours.
You can
use all or part of this money to buy an object
, like the one
half of the participants will
receive in a moment.
As a next step
, you will need to indicate at which price you are
willing to buy the object
. At the same tim
e, the participants that will have received the
object
will indicate at which price
they are willing to sell it.
Next, the price of the object will be determined through a random draw
.
It
will lie
between 0,50CHF and 10CHF. You thus cannot influence this price. You may only decide
if, at a given price, you prefer buying the object or k
eeping your money.
How exchanges will be made
:
•
If you chose to buy the object
at the
drawn
price, this amount will be
deducted from your 10CHF and you will
receive the object
.
You will equally
receive what is left from your 10CHF.
•
Moreover, a number between 1 and 100 will be randomly drawn. If this number
lies between 1 and 25, you will be forced to buy the object at the drawn price.
This exchange is mandatory. There is thus a 25% chance t
hat you will be
forced to buy the object
at
the
drawn
price whether this is according to
your indicated choice or not at this price.
The experiment consists of one single round. So, think carefully about your choice. Keep
in mind that you have all interest to respond in accordance with your prefe
rences as you
do not have any influence on the market price that will later be revealed.
!
!
!
!
!
!
!
Mechanism First with Random Price
–
Sellers
Please read all instructions given on this page attentively.
From now on, it
is strictly forbidden to talk to your colleagues.
It is important for
the good course of the experiment that you respect this rule. If you have a question,
please raise your hand to address one of the assistants. If you do not respect this rule,
we have to exclude you from the experiment.
A.
What is
it about
?
In a few moment
s
you are going to receive an object for this experiment.
This
object will be yours.
You may sell your object for money to one of the participants that
did not receive one. As a next step, you will need to indicate at which price
you are
willing to sell your object. At the same time, participants that did not receive an object
will indicate at which price they are willing to buy one.
Next, the price of the object will be determined through a random draw
.
It
will lie
between 0,50CH
F and 10CHF. You thus cannot influence this price. You may only decide
if, at a given price, you prefer
keeping or selling
the object
for money.
How exchanges will be made
:
•
If you chose to sell your object at the drawn price, you will receive this
amount in exchange for your object
that will you then no longer have.
•
Moreover, a number between 1 and 100 will be randomly drawn. If this number
lies between 1 and 25, you will be forced to
sell your
object
at the
drawn
price.
This exchange is mandatory. There is thus a 25% chance that you will be
forced to sell your object
at the market price whether this is according to
your indicated choice or not at this price.
The experiment consists of one single round. So, think carefully about your choice. Keep
in mind that you have all interest to respond in accordance with your
preferences as you
do not have any influence on the market price that will later be revealed.
Comprehension Questions Control
Experiment
–
Buyers
1.
Below, you see the choice of Arnaud
.
Arnaud
indicated to be willing to buy a mug for any price less than or equal to 4 CHF.
If the random price were drawn to be 3 CHF
and
the other random draw determined that
Arnaud is not forced t
o buy a mug
:
Given
this
choice, Arnaud buys a mug
:
☐
yes
☐
no
If you ticked
yes
:
Wha
t price does he pay for the mug
?
☐
4 CHF
☐
3 CHF
☐
other amount
______
For everyone
:
How much money remains from the 10CHF
he received for this experiment
?
☐
6 CHF
☐
7 CHF
☐
10 CHF
☐
other amount
______
2.
Below, you see the choice of
Zoé
.
Zoé
indicated to be willing to buy a mug for any price less than
or equal to 7
CHF.
If the random price were drawn to be
8
CHF
and
the other random draw determined that
Zoé
is not forced to buy a mug
:
Given
this
choice,
Zoé
buys a mug
:
☐
yes
☐
no
If you ticked
yes
: What price does
s
he pay for the mug
?
☐
7 CHF
☐
8 CHF
☐
other amount
______
For everyone
: How much money remains from the 10CHF
s
he received for this
experiment
?
☐
3 CHF
☐
2 CHF
☐
10 CHF
☐
other amount
______
3.
Below, you see the choice of
Lucas
.
Lucas
indicated to be willing to buy a mug for any price less than
or equal to 5
CHF.
If the random price were drawn to be
6
CHF
and
the other random draw determined that
Lucas
is forced to buy a mug
:
Given
this
choice,
Lucas
buys a mug
:
☐
yes
☐
no
If you ticked
yes
: What price does he pay for the mug
?
☐
5 CHF
☐
6 CHF
☐
other amount
______
For everyone
: How much money remains from the 10CHF he received for this
experiment
?
☐
5
CHF
☐
4
CHF
☐
10 CHF
☐
other amount
______