Chloe Tergiman

Beliefs and Endogenous Cognitive Levels: An Experimental Study

Uses a laboratory setting to manipulate our subjectsE¼ beliefs about the cognitive levels of the players they are playing against. We show that in the context of the 2/3 guessing game, individual choices crucially depend on their beliefs about the level of others. Hence, a subjectE¼s true cognitive level may be different than the one he exhibits in a game with the difference being attributed to his expectations about the sophistication of the players he is playing against.

Communication in Multilateral Bargaining

One of the most robust phenomena in the experimental literature on multilateral bargaining is the failure of proposers to extract equilibrium rents. However, all previous experiments have overlooked the fact that outside the lab committee members are allowed to - and do - engage in sometimes intense communication processes prior to voting on a proposal. We conduct an experimental test of the Baron-Ferejohn model in which we allow committee members to engage in unrestricted cheap-talk communication before a proposal is submitted. We find that proposers extract a significantly higher share of resources when communication is allowed. Communication increases proposer power through two channels. First, it mitigates the uncertainty surrounding the amount a coalition member is willing to accept. Second, it allows potential coalition members to compete for a place in the coalition by lowering this stated price.

Entrepreneurship Does Pay

Existing evidence suggests that returns to entrepreneurship are low relative to the returns to wage work. These findings have been associated with non-pecuniary benefits, and more generally with heterogeneity in preferences, rationality or beliefs. In this paper I challenge this view. I extend the data and show that the differential in earnings is in fact U-shaped, with entrepreneurs earning more than wage workers both early and late in their lives. I argue that the difference in the earnings profile can be rationalized in the context of a life-cycle model of occupational choice where agents are fully informed, face no uncertainty, are fully rational, and ex-ante identical. I estimate this model and show that the lifetime returns to entrepreneurship can in fact be identical to those of being a wage worker.

Ownership Dynamics within Founder Teams: The Role of External Financing

This paper examines how founders within start-up teams dynamically re-adjust their relative ownership stakes. It leverages a unique dataset from British Columbia, Canada, which contains detailed information on founder ownership over time. Two trade-offs between efficiency and fairness are identified, one at the time of founding, the other as the venture develops. Teams with a preference for fairness at the start, as witnessed by an equal division of founder shares, also exhibit a dynamic preference for fairness, as witnessed by a reluctance to change ownership over time. Relative founder stakes are more likely to change when a company raises investments. Larger rounds, and lower valuations are associated with bigger changes in relative founder stakes.

Preferences for Power

Power—the ability to determine the outcomes of others—usually comes with various benefits: higher compensation, public recognition, etc. We develop a new game, the Power Game, to demonstrate that a substantial fraction of individuals enjoy the intrinsic value of power: they accept lower payoffs in exchange for power over others, without any benefits to themselves. These preferences exist independently of other components of decision rights, cannot be explained by social preferences and are not driven by mistakes, confusion or signaling intentions. We further show that valuation of power (i) is higher when individuals directly determine outcomes of others; (ii) depends on how much discretion one has over those outcomes; (iii) is tied to relationships between individuals; and (iv) is likely domain dependent. We establish that ignoring preferences for power may have large welfare implications and, consequently, should be included in the study of political systems and labor contracts. Date: First Version: May 2017. Current version: August 2019.