844 THE AMERICAN ECONOMIC REVIEW DECEMBER 1997 experiment,everyone will be regrouped into these token values will change from four entirely new groups.Therefore,when- aadomway.Yoeda .the other peoplein PRIVATELY what your new token value is at the last group you were in.You told the identity of the other members in your oayone s amount is group.Since we will be running four exper wait st for ach decision of how many tokens to spe Rules for Experiment 1 kens were yo and what your experment you will have camings were for This will continue for ten rounds.Following tokens you wish to spend.The amount of PAYOFFS ers in your gre ou will receive 3 FRANCS times the total times the number of token ve you ke nange fom round to round that this means every time anyone in vour To be more pe roum group spends a token,everyone in the group likely to be anywhere from FRANCS but the s additiona FR Ihere is absolutely no sys. token value for that token.WHAT HAPPENS values or the token value 0y0 R GROUP HAS NO EFFECT ON determination of token values OTHE OF THE and across people is entirely random.There. Therefore in each the fol in your group will generally lowing possible earnings.as shown in the table: [WRITE EARNINGS TABLE ON BOARD AND EXPLAIN HOW TO READ IT] EARNINGS TABLE FOR EXPERIMENT I Your spending decision Others Your earnings (in FRANCS) 0 W token token value 456 89 Here is an example: your token value was 12.You FRANCS.If you hac spent three tokens you would have eamed 9+844 THE AMERICAN ECONOMIC REVIEW DECEMBER \997 experiment, everyone will be regrouped into four entirely new groups. Therefore, when￾ever we change groups, the other people in your group will be completely different from the last group you were in. You will not be told the identity of the other members in your group. Since we will be running four exper￾iments tonight, you will be assigned four dif￾ferent groupings, one for each ten-round experiment. Rules for Experiment 1 Each round of the experiment you will have nine tokens. You must choose how many of these tokens you wish to keep and how many tokens you wish to spend. The amount of money you earn in a round depends on how many tokens you keep, how many tokens you spend, and how many tokens are spent by oth￾ers in your group. Each round, you will be told how many FRANCS each token is worth if you keep it. This amount, called your TOKEN VALUE, and will change from round to round and will vary from person to person randomly. To be more specific, in each round, this amount is equally likely to be anywhere from 1 to 20 FRANCS. There is absolutely no sys￾tematic or intentional pattern to your token values or the token values of anyone else. The determination of token values across rounds and across people is entirely random. There￾fore, everyone in your group will generally have different token values. Furthermore, these token values will change from round to round in a random way. You will be informed PRIVATELY what your new token value is at the beginning of each round and you are not permitted to tell anyone what this amount is. After being told your token value, you must wait at least ten seconds before making your decision of how many tokens to spend and how many to keep. Your keyboard will be fro￾zen for this period of time. When everyone has made a decision, you are told how many to￾kens were spent in your group and what your eamings were for that round. This will continue for ten rounds. Following each round you will begin with nine new to￾kens and you will be randomly assigned a new token value between 1 and 20 ETIANCS. PAYOFFS You will receive 3 FTIANCS times the total number of tokens spent in your group. In ad￾dition, you will also receive your token value times the number of tokens you keep. Notice that this means every time anyone in your group spends a token, everyone in the group (including the spender) gets an additional 3 FRANCS, but the spender forgoes his or her token value for that token. WHAT HAPPENS IN YOUR GROUP HAS NO EFFECT ON THE PAYOFFS TO MEMBERS OF THE OTHER GROUPS AND VICE VERSA. Therefore, in each round, you have the fol￾lowing possible earnings, as shown in the table: [WRITE EARNINGS TABLE ON BOARD AND EXPLAIN HOW TO READ IT] Your spending decision EARNINGS TABLE TOR EXPERIMENT 1 Others N tokens N tokens N tokens N tokens N tokens N tokens N tokens A^ tokens N tokens N tokens Your eamings (in FRANCS) (N*y) + (9*your token value) 3 + (JV*3) + (8*your token value) 6 + (//*3) •¥ (7*your token value) 9 -1- (Af*3) -(- (6*your token value) 12 -V (N*i) +• (5*your token value) [5 + (A^3) + (4*your token value) 18 -f (N*3) + (3*your token value) 2! + (N*3) + (2*your loken value) 24 + (N*3) + your token value 27 -1- (A/*3) Here is an example: Suppose everyone else in your group spends 13 tokens in all and you spend four tokens and your token value was 12. You would eam 12 + 39 + 60 = 111 FRANCS. If you had spent three tokens you would have eamed 9 +