Gotta' Have Money to Make Money? Bargaining Behaviour and Financial Need of Microentrepreneurs

Working Paper
Published on 1 November 2020


Bargaining over purchase prices with microenterprise owners in Ghana, Hardy et al. (2020) show that poorer sellers agree to significantly lower prices than wealthier peers. This relationship is robust both across firms and within firms over time, even after controlling for a plethora of time-varying observables. A computerized bargaining experiment on the same sample, with randomized initial endowment, corroborates the real-bargaining findings. This pattern can be explained by a simple application of classic bargaining theory to include endowments with nonlinear preferences. Pinpointing mechanisms behind this large and robust empirical relationship is a key frontier in understanding barriers to the pro fitability of microenterprises.


Morgan Hardy

New York University, Abu Dhabi

Gisella Kagy

Vassar College

Lena Song

New York University