Please read the following instructions very carefully. It takes around 3-5 minutes to read, so please take your time.
Today we are going to conduct a market in which all of you will be buyers. The commodity to be traded is divided into distinct items or "units". We will not specify a name for the commodity; we will simply refer to units.
Trading will occur in a sequence of periods. The prices that you negotiate in each trading period will determine your earnings, in kroner and øre. After the experiment has ended, I will draw periods at random and pay earnings in these two periods in cash.
We will proceed in the following way. First I will explain how buyers compute their earnings, and then I will explain how sales and purchases are arranged in the market. After reading the instructions and reviewing your specific information. Then we will begin the first trading period.
Buyers earn money by purchasing units at prices that are below their values. Profits are computed by subtracting each unit’s purchase price from its value. Therefore,
Your Earnings = Value of Unit – Purchase Price
For example, the buyer record sheet above shows that the value of the first unit is $6.25, the value of the second unit is $5.05 and the value of the third unit is $3.00. If the first unit is bought at a price of $4.00, the second unit is bought at a price of $4.25, and the third unit is not bought, the buyer’s profits would be:
Buyer earnings from Period 1 are:
Unit 1 = $6.25 – $4.00 = $2.25 (enter $2.25 in Row 1, Column 3)
Unit 2 = $5.05 – $4.25 = $0.80 (enter $0.80 in Row 2, Column 3)
Unit 3 not bought = $0 (enter $0.00 in Row 3, Column 3)
Total Earnings in Period 1 = $3.05
I will begin each trading period with an announcement that the market is open. At any time during the period, any buyer is free to make a bid to buy a unit. All bids and offers pertain to a single unit, it is not possible to sell multiple units as a package.
All buyers have identification numbers. Your number is shown at the top.
All bids and asks must follow an improvement rule. All bids must be higher than the highest outstanding bid. In the example here, the next bid must be above $4.00.