Institutional Affiliation: Massachusetts Institute of Technology
|Durability, Deadline, and Election Effects in Bargaining|
with : w22284
We propose a tractable model of bargaining with optimism. The distinguishing feature of our model is that the bargaining power is durable and changes only due to important events such as elections. Players know their current bargaining powers, but they can be optimistic that events will shift the bargaining power in their favor. We define congruence (in political negotiations, political capital) as the extent to which a party's current bargaining power translates into its expected payoff from bargaining. We show that durability increases congruence and plays a central role in understanding bargaining delays, as well as the finer bargaining details in political negotiations. Optimistic players delay the agreement if durability is expected to increase in the future. The applications of this ...
|Learning and Disagreement in an Uncertain World|
with , : w12648
Most economic analyses presume that there are limited differences in the prior beliefs of individuals, as assumption most often justified by the argument that sufficient common experiences and observations will eliminate disagreements. We investigate this claim using a simple model of Bayesian learning. Two individuals with different priors observe the same infinite sequence of signals about some underlying parameter. Existing results in the literature establish that when individuals are certain about the interpretation of signals, under very mild conditions there will be asymptotic agreement---their assessments will eventually agree. In contrast, we look at an environment in which individuals are uncertain about the interpretation of signals, meaning that they have non-degenerate prob...