A bargaining model for PLS entrepreneurial financing: A game theoretic model using agent‐based simulation

This article aims to use a bargaining power model reduce moral hazard—in the form of entrepreneurial effort shirking—and derive an optimum sharing ratio Profit and Loss Sharing (PLS) contract that involves Venture Capitalist Entrepreneur. The reveals following interesting findings. First, under complete information—where has - offers entrepreneur profit is less than her capital contribution ratio. Second, in incomplete information setting, demands higher when sum marginal cost (from exercising effort) private benefits low greater return high effort). In addition, used span negotiation about Finally, agent based simulation (Netlogo) platform considered implement model, which allows faster numerical calculations share helps decide on validity funding contract.