Bargaining with Uncertain Value Distributions

This paper studies a bargaining model in which the seller is uncertain about which distribution the buyer's values are drawn from. The distribution of the buyer's values is fixed across periods, while the buyer’s values are drawn independently from the distribution each period. In the classical model of repeated bargaining where the buyer’s value is drawn from a commonly known distribution and fixed across periods, the high-value buyer has a strong incentive to conceal his value, and the seller loses most of her bargaining power. An important question is whether adding a layer of uncertainty makes the high-value buyer more willing to accept high-price offers and improves the seller’s revenue. We find this to be the case as long as the seller’s ex ante beliefs are sufficiently optimistic.Repeated Bargaining, Uncertain Value Distributions, Revenue Comparison, Learning

Bubbles and Experience: An Experiment with a Steady Inflow of New Traders

We revisit the effect of traders' experience on price bubbles by introducing either one-third or two-thirds steady inflow of new traders in the repeated experimental asset markets. We find that bubbles are not significantly abated by the third repetition of the market with the inflow of new traders. The relative importance of experience to the formation of bubbles depends on the proportion of new traders in the market. Our findings identify a market environment where increased experience is not sufficient to eliminate price bubbles.Bubbles; Asset Markets; Experience; Inflow of Traders

How Optimism Leads to Price Discovery and Efficiency in a Dynamic Matching Market

Abstract We study a market search equilibrium with aggregate uncertainty, private information and heterogeneus beiefs. Traders initially start out optimistic and then update their beliefs based on their matching experience in the market, using the Bayes rule. It is shown that all separating equilibria converge to perfect competition in the limit as the time between matches tends to 0. We also establish existence of a separating equilibrium.Markets with search frictions, aggregate uncertainty, heterogeneous beliefs, optimism, bargaining, foundations of Walrasian equilibrium

How Optimism Leads to Price Discovery and Efficiency in a Dynamic Matching Market

We study a market search equilibrium with aggregate uncertainty, private information and heterogeneus beiefs. Traders initially start out optimistic and then update their beliefs based on their matching experience in the market, using the Bayes rule. It is shown that all separating equilibria converge to perfect competition in the limit as the time between matches tends to 0. We also establish existence of a separating equilibrium.Markets with search frictions, aggregate uncertainty, heterogeneous beliefs, optimism, bargaining, foundations of Walrasian equilibrium