Seminar: Tucker McGrimmon, Department of Sociology,University of South Carolina, Columbia.

Title: Beliefs and Bargaining Power: A Behavioral Approach to Price Formation in Private Negotiation with Public Information.

Abstract: We model and empirically evaluate the impact of endogenously generated public and private information on prices within a bargaining framework. We contrast a rational form of information processing with two nonstandard information processing models that assume individuals compare own outcomes to that of others. These comparisons, defined as market distance, are used to determine the weight allocated to each piece of information. Models of expectations are then embedded into a repeated bargaining game and we use a modified version of the asymmetric Nash bargaining solution to characterize equilibrium. The model in which profit expectations are formed in a self-centered manner most closely fits experimental data.