VC Bargaining

This page is for Ed and Ron to share their thoughts on VC Bargaining. Access is restricted to those with "Trusted" access.

Thoughts

• We shouldn't include effort from the entrep. - we want a model that has no contract theory, just bargaining.

A Basic Model

[math]V_t=V_{t-1} + f(x_t) - k \,[/math]

with

[math]V_0=0, f(0)=0, f'\gt 0, f''\lt 0, k\gt 0 \,[/math]

should do us just fine. Having [math]k\gt 0\,[/math] will force a finite number of rounds as the optimal solution providing there is a stopping constraint on [math]V_t\,[/math] (so players don't invest forever).

There are two simple methods that come to mind:

[math]f'(0) \gt 0, f''\lt 0, \exist z* s.t. \forall z \gt z* f'(z)\lt 0\,[/math]

Or we could force and exit once

[math]\sum_t (x_t) \ge \overline{x}\,[/math]

In each period there is Rubenstein finite bargaining, with potentially different patience, and one player designated as last. This will give a single period equilibrium outcome with the parties having different bargaining strength.