Instructions

In this experiment you are either an investor or a project manager. You will be informed about your role at the beginning of the experiment and your role will stay the same throughout the whole experiment.

There are twice as many project managers as investors in this experiment. Each investor chooses between different project managers. Investors make their choices one after another in random order and there are up to eight investors.

After each investor has chosen a project manager, each chosen project manager receives 10 ECU, which s/he can decide to transfer to the investor to increase the investor's earnings. If the manager decides to transfer, these ECU are doubled and the investor receives 20 ECU, while the project manager receives nothing. If the manager decides not to transfer s/he can keep the 10 ECU.

After this decision the project manager chooses one from eight possible projects. Each project can either succeed or fail.

Neither the investor nor the project manager knows the exact probability with which a project will succeed or fail when choosing it. However, there are only two types of projects:

• Type 1 succeeds with a probability of 75% (meaning it succeeds on average in three out of four cases);
• Type 2 succeeds with probability 25% (on average in one out of four cases).

Each type of project is equally likely to occur.

A successful project generates more earnings for an investor than a failed project, the details of which will be explained later. You are always informed about your potential earnings before the project is implemented, but you never know for certain whether it is of the type with a high or a low success probability.