Discussion Papers 745
Appendix
• If both you and the anonymous other group member choose the joint remuneration mode,
each of you will be paid based on the average effort in your group in the second stage.
Each of you will be paid 8 ECU per unit of the average effort by you and the other group
member.
• If you choose the joint remuneration mode, but the anonymous other group member
chooses the private remuneration mode, you will both adhere to the private remuneration
mode. You will be paid 7 ECU per effort unit that you individually choose in the second
stage. The other group member will be paid 7 ECU per effort unit that he or she chooses in
the second stage.
Your earnings
Your profit (in ECU) in a period is determined as follows.
• If you are in the private remuneration mode, your profit is determined by your individual
effort multiplied by 7 ECU minus the cost of your individual effort in ECU. Below you
find Table 2 (cost equals squared effort divided by 10) and 2A (cost equals squared effort
divided by 8) that show for each level of individual effort the corresponding cost and the
profit under private remuneration. Those of you who will find Table 1 in the envelope at
the beginning of the experiment will also be provided with Table 2 while those who will
find Table 1a will also be provided with Table 2A.
• If you are in the joint remuneration mode, your profit is determined by the average effort
by you and the other group member, multiplied by 8 ECU, minus the cost of your individ-
ual effort in ECU.
Your total profit for the experiment equals the sum of your profits over the 30 periods.
At the end of the experiment, your total profit will be converted to Canadian dollars with a
conversion rate of 50 cents per 100 ECU.
Available information
At the end of the first stage of each period, you are told whether you are in private or joint
remuneration mode.
At the beginning of each period (except for the first one), you are informed of your result in
the previous period. This includes the remuneration mode that you chose, the remuneration
34
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