Experimental Design
Each subject faces an individual decision problem over a span of several rounds. Each round presents two tasks: a guessing task and an investment task. In the guessing task, the subject is briefly shown a square grid containing one hundred dark grey and light grey balls of different sizes for one-tenth of a second. Their objective is to estimate the number of dark grey balls.
The investment task takes place after the guessing task. A single ball is randomly selected by the computer from the pool of one hundred balls, with the color undisclosed to the subject. The subject is endowed with an amount of money to invest and decides how much of that money to invest in a risky option. If the selected ball is dark grey, signifying success, the investment triples in return: the subject receives the uninvested amount plus three times the investment. Conversely, if the ball is light grey, indicating failure, the subject solely receives the uninvested amount.
After certain rounds, specifically with a one-third probability each round, the subject is prompted to report the distance between their guess and the actual number of dark grey balls. Accurate responses are required to advance to the subsequent round. The subject is informed that this measure is implemented to ensure sustained attention throughout the experiment.
We examine two treatments, differing solely in the timing of when the actual number of dark grey balls in a round is revealed. In fact, the instructions are identical for both treatments, except for one sentence detailing the timing of this revelation.
Risky treatment: The computer reveals the number of dark grey balls after the guessing task and before the investment task.
Ambiguous treatment: The computer reveals the number of dark grey balls at the end of the round (after the investment task).
Each subject is exposed to both treatments as follows. At the beginning of the experiment, each subject is randomized to the risky or ambiguous treatment. In the first part of the experiment, each subject does the treatment assigned to them. In the second part of the experiment, each subject does the other treatment.
In summary, there will be two treatments: (1) Risky first, ambiguity second, and (2) Ambiguity first, risky second.