Gotta’ Have Money to Make Money? Theory and Evidence Linking Financial Need with The Bargaining Behavior of Microentrepreneurs, Morgan Hardy (CSSS Seminar, 4/17/2019)
Posted: 4/15/2019 (Local Events)
Morgan Hardy
Assistant Professor, Department of Economics, NYU Abu Dhabi https://sites.google.com/a/nyu.edu/morganhardy/
Although haggling over the prices of goods and services is an integral part of life for the world’s poor, little work has been done to extend bargaining models to a developing country context. We develop a theoretical model of bargaining that takes into account the initial endowment of the seller. Our model predicts that sellers with lower initial endowment will settle for a lower price. We test our model using data from a bargaining exercise over a real product, a child’s shirt, with garment making microenterprises in Ghana. Our data supports the major testable prediction from our model: sellers from poorer households agree to a lower price than rich sellers. This relationship is robust to controlling for a number of potentially confounding firm and owner characteristics, including firm size and product quality. Preliminary findings from a lab-in-the-field experiment, in which we randomly assign initial endowments in a bargaining game that mirrors the shirt exercise, appear to corroborate our results. We conclude that further exploration of this “need-bargaining” relationship is a key frontier in future bargaining research aimed at understanding the lives of the poor.
Date: 04/17/2019
Time: 12:30–1:30 PM
Location: Savery (SAV) 409