Experimental Design
This is a laboratory experiment, conducted in a standard university experimental economics lab, recruiting students broadly across the university. Subjects will be randomly assigned to treatments, and then randomly assigned to roles (high entry cost and low entry cost) and into groups of four to make a choice.
The main experimental task involves subjects making decisions about supplying units of a fictitious good to the market with varying production costs and entry fees. In the baseline, a subject decides to provide goods independently, and the unit income will be the uncertain market price realized only after all subjects have made their supply decisions. In the treatments, everything remains the same except that we introduce the possibility of providing market supply through an aggregator and a computerized aggregator provides either a guaranteed price or a share of the realized market price as the contract price to subjects. The experiment also elicits subjects’ risk attitudes and standard demographic information, which would be used as control variables in regression specifications.