Overview

This is an experiment in the economics of trade in a market with limited contract enforcement.  There will be a training phase of about 30 minutes, and the in-lab experiment will last approximately 3 hours.  You will receive $25 for completing these web-based instructions and for arriving on time for the experiment.  In addition, you will receive earnings based on the outcome of the experimental sessions.  Although it is highly unlikely, you may incur a loss in the experiment.  Any loss will be taken out of the $25 show-up fee.

You will be playing the role of either a buyer or a seller in a market where only one good is traded.  Sellers may produce the good for a cost given by a supply function, and buyers value the good according to a demand function.  You will be given the supply or demand function for yourself; others may have different functions.

The experiment consists of a series of periods, each divided into 4 rounds.  During each round, sellers will make an offer to sell their good by choosing a price and quantity.  After all sellers have made their offers, buyers choose which offers to accept, and/or make a counteroffer.  This process repeats, and sellers have a chance to accept buyers' offers beginning in the second round.  When a player accepts an offer, a contract between the buyer and seller is created.  Note buyers must wait while sellers are making their decisions and vice versa.  You will have 4 rounds to enter the contracts you wish to enter.  After all rounds for a given period are completed, both buyers and sellers will review a list of their contracts, and they will decide which ones they will fulfill.  That is, buyers will decide whether to pay, and sellers will decide whether to deliver the good.  These decisions are made concurrently, i.e. you cannot wait for the other agent to make a decision before making yours.

Buyers and sellers will have a two-letter state abbreviation that is attached to each offer and each contract.  Thus while there is no immediate monetary penalty for not fulfilling your end of a contract, the other players will have a summary of your decisions.