Matching and Bargaining in Entrepreneurial Finance: Evidence From an Experimental System

101 Pages Posted: 20 Nov 2020 Last revised: 27 Feb 2025

See all articles by Mehran Ebrahimian

Mehran Ebrahimian

Stockholm School of Economics - Finance Department

Ye Zhang

Stockholm School of Economics - Finance Department

Date Written: February 15, 2022

Abstract

We estimate a search-and-matching model with bargaining, using real-stakes experiments with U.S. venture capitalists (VCs) and startups, alongside real-world portfolio data, to examine how bargaining affects the distribution of payoffs and welfare in the startup-VC matching environment. We identify startup and VC characteristics that influence bargaining and find that 60 (55) percent of the impact of appealing characteristics on startups' (VCs') benefits from matching arises from improved bargaining power. Counterfactual analyses further reveal a nontrivial impact of search frictions on bargaining and welfare. Overall, our results highlight the first-order importance of bargaining in shaping matching outcomes in entrepreneurial financing ecosystems.

Keywords: Search and Matching, Bargaining, Entrepreneurial Finance, Field Experiments

JEL Classification: C78, G24, L26, C93

Suggested Citation

Ebrahimian, Mehran and Zhang, Ye, Matching and Bargaining in Entrepreneurial Finance: Evidence From an Experimental System (February 15, 2022). Available at SSRN: https://ssrn.com/abstract=3724424 or http://dx.doi.org/10.2139/ssrn.3724424

Mehran Ebrahimian

Stockholm School of Economics - Finance Department ( email )

Sveavägen 65
Stockholm, 11383
Sweden

HOME PAGE: http://www.mehranebrahimian.com/

Ye Zhang (Contact Author)

Stockholm School of Economics - Finance Department ( email )

Stockholm
Sweden

HOME PAGE: http://https://www.yezhang.space/

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