Unstructured Bargaining with Costly Money Holdings

This project expands the already existing large experimental literature exploring various theories of non-cooperative bargaining behavior, contributes to the emerging laboratory evidence on monetary policy inner workings and, more generally, to the growing idea that laboratory tests of monetary policy can be a part of the analyst's toolkit alongside theory and empirical field data.

In order to achieve the above-mentioned goals, I deviate from a typical bargaining experiment in the following ways:
1. Most bargaining experiments involve a fixed pie to divide and an explicit extensive form for the bargaining process. In this paper I study bargaining solutions in a setting where the pie size is determined endogenously and simultaneously with the division of the pie, and the bargaining has very little structures (what I will call semi-unstructured bargaining).

2. To the best of my knowledge, so far no bargaining experiment has considered the possibility of endogenous liquidity constraints, implemented trough ex-ante choice of costly money holdings. In fact, Duffy et al. (2021), on which this works builds on, are the first to introduce the possibility of a liquidity constraint in a bargaining experiment but they do that by imposing the constraint as an exogenous factor.