This dissertation consists of four chapters, and the first chapter gives a brief summary of the dissertation. Chapters 2 and 3 analyze the Nash bargaining problem with endogenously determined threats in the n-person case. Chapter 4 discusses seemingly inconsistent behavior in voting for incumbents and for term limitation. In Chapter 2, we provide two bargaining models with variable threats in the n-person case: commitments to threat strategies are available and required in the first model, but they are not available in the second one. We formulate these two models as extensive games, and give two sets of axioms for the solution concepts in these models. The two sets of axioms uniquely determine the Nash bargaining solution relative to an equilibrium threat and relative to a Nash equilibrium of the underlying noncooperative game, respectively, in the first and second models. Furthermore, we show that when the number of players is large, in a game with side payments, the difference between the two models becomes insignificant. In Chapter 3, we discuss the voluntary decisions of commitments to threat strategies in Nash bargaining. Players are allowed to choose whether or not to commit to threat strategies. We consider three possible extensions where the voluntary decisions of commitments are included. In the two-person case, both players choose to commit to threat strategies voluntarily in all three extensions. However, an example is given to show that this is not the case for more than two players; the result depends upon an extension. In Chapter 4, we try to explain seemingly inconsistent behavior in voting for incumbents and for term limitation. Voters in several states voted recently for the introduction of a term limit, while at the same time, re-electing a large percentage of their incumbents. We formulate the candidate election within a district as a two-person game and integrate the results of the election games over all districts in a state. By doing so, we explain the voting behavior of voters in the candidate election and in the term limitation election, based on the assumption that voters are self-interested in both elections. / Ph. D.

We consider a risk averse entrepreneur who approaches a diversified venture capitalist (VC) for financing of a project with positive potential return. We develop several models that capture key features of the venture financing, including staged investment, VC oversight costs and agency conflicts. The contract between the VC and the EN includes risk-free and pay-performance sensitive compensation. Moral hazard arises because the EN must exert effort for the project to succeed. Our model is novel in that it also allows for asymmetric beliefs about project quality due to the EN's optimism even when the VC and EN face symmetric information. We first analyze the VC-EN relationship when the VC has bargaining power. We characterize the equilibrium levels for the pay-performance sensitivities, investment and effort over time and show they can be either increasing or decreasing or initially increasing and then decreasing. We find that asymmetric beliefs and risk aversion have opposite effects on the VC-EN relationship. When the EN is moderately more optimistic than the VC, he accepts more risk and exerts more effort and the VC responds with more investment. In contrast, risk aversion reduces effort and investment. Our model predicts a performance-sensitive investment policy where critical milestones must be achieved for investment to continue. These milestones increase with the risk aversion and decrease with the asymmetry in beliefs. Consequently, project duration increases with asymmetric beliefs and decreases with risk aversion. We calibrate this core model to empirical data and use numerical analysis to demonstrate that the technical and systematic risks have opposite effects. The VC's payoff and the project's value and duration increase with technical risk and decrease with systematic risk. We analyze the relationship when the EN has bargaining power, and find that the equilibrium and the corresponding implications for venture financing do change. In this setting, the negative effects due to risk aversion are more pronounced. We also find that if the EN's effort cannot be observed by the VC, then the pay-performance sensitivities, investment and effort all increase.