Experimental Design
### Project Overview and Experimental Design
This study employs a two-phase lab experiment to investigate consumers' strategic data manipulation (misrepresentation) and their valuation of data privacy under personalized pricing.
#### Phase 1: Risk Elicitation and Cognitive Screening (Prior Calibration)
We will recruit approximately 120 subjects to participate in 4 independent sessions (30 subjects per session). This phase consists of two tasks:
1. **Risk Preference Elicitation:** Subjects complete the Bomb Risk Elicitation Task (BRET) to measure their individual risk aversion parameter (\alpha).
2. **Cognitive Ability Test:** Subjects complete a brief cognitive reflection and numeracy test to screen for comprehension and ensure sufficient mathematical ability.
The individual data collected in Phase 1 will be used to calibrate the theoretical parameters and empirical distributions for Phase 2.
#### Phase 2: The Main Interactive Experiment
Subject to attrition, we expect 60 to 90 subjects to return from the Phase 1 pool, who will be randomly grouped into 3-player triads. Each triad consists of one Consumer A (High Type), one Consumer B (Low Type), and one Platform. While subjects are assigned to these roles, the Platform's investment decisions are programmatically determined by the computer at the theoretical equilibrium values.
Phase 2 consists of two consecutive parts:
##### Part 1: Repeated Dynamic Game (20 Rounds)
For 20 rounds, subjects interact in their fixed triads. In each round:
- **Consumer's Decisions:** Consumers can choose either "Action T" (truthfully revealing their assigned private type) or "Action M" (manipulating their data to misrepresent themselves as the other type).
- **Belief Elicitation:** Consumers are also asked to predict the platform's investment level.
- **Platform's Strategy:** The platform's investment is simulated by the computer program and fixed at the theoretical equilibrium value.
- **Payoffs:** Individual round payoffs are jointly determined by the consumer's decision (T or M), the computer's investment level, and a random stochastic factor.
- **Incentives:** At the end of Part 1, one of the 20 rounds will be randomly selected for actual payment.
##### Part 2: Elicitation of WTA via BDM Mechanism (1 Round)
Roles from Part 1 remain strictly unchanged. Part 2 lasts for exactly 1 round:
- **Low Type (Consumer B):** Performs the same truth-telling/manipulation decision as in Part 1.
- **High Type (Consumer A):** Instead of a binary choice, Consumer A utilizes the Becker-DeGroot-Marschak (BDM) mechanism to bid a minimum price (subsidy) they are willing to accept to choose "Action T" (truthful revelation). Theoretically, Consumer A who voluntarily chose T in Part 1 should bid 0, while those who chose M in Part 1 should bid a positive WTA.
- **Platform's Strategy:** The investment level remains computer-generated.
- **Incentives:** This single round is 100% paid and added to the subject's final cumulative earnings.