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Arieh Gavious and Ramy Elitzur
''Venture Capital Contracting with Renegotiation''
( 2009, Vol. 29 No.1 )
This paper examines contracting between a venture capitalist and an entrepreneur in a setting with unobservable effort when contracts are renegotiated each period. The contribution of our paper lies in the insights it provides on optimal contracts in this setting. The insights from our model prove to be significantly different in certain respects than those obtained under a multi-period contract without renegotiation or a single period setting. An example is worked out to illustrate the division of payoff between the venture capitalist and the entrepreneur each period.
Manuscript Received : Dec 12 2008 Manuscript Accepted : Feb 09 2009

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