This paper studies a two-sided incomplete information bargaining model between a seller and a buyer. The buyer has an outside option, which is modeled as a sequential search process during which he can choose to return to bargaining at any time. Two cases are considered: In Regime I, both agents...

This experimental study investigates two bargaining games with two-sided incomplete information between a seller and a buyer. In the first game with no outside options many subjects do not use the incomplete information to their advantage as predicted. We find that a model with adjusting priors...