Job Market Paper
Selling Signals [PDF]
This paper studies a signaling model in which a strategic player determines the cost structure of signaling. A principal chooses a price schedule for a product, and an agent with a hidden type chooses how much to purchase as a signal to the market. When the market observes the price schedule, the principal charges monopoly prices, and the agent purchases less than the first-best. In contrast, when the market does not observe the price schedule, the principal charges lower prices, and the agent purchases more than in the observed case; those of the highest types purchase more than the first-best. In terms of payoffs, the principal gains lower profits, whereas the agent obtains higher utility than in the observed case. The model can be applied to schools choosing tuition, retailers selling luxury goods and media companies selling advertising messages.
This paper studies a signaling model in which a strategic player determines the cost structure of signaling. A principal chooses a price schedule for a product, and an agent with a hidden type chooses how much to purchase as a signal to the market. When the market observes the price schedule, the principal charges monopoly prices, and the agent purchases less than the first-best. In contrast, when the market does not observe the price schedule, the principal charges lower prices, and the agent purchases more than in the observed case; those of the highest types purchase more than the first-best. In terms of payoffs, the principal gains lower profits, whereas the agent obtains higher utility than in the observed case. The model can be applied to schools choosing tuition, retailers selling luxury goods and media companies selling advertising messages.
Working Papers
Optimal Sequence for Teamwork (with Yangbo Song), coming soon
We analyze a principal-agent model to examine how peer information affects the optimal sequence for teamwork. The agents work on a joint project, each responsible for an individual task. The principal chooses a sequence of performance and rewards upon success of the project. The probability of success depends on each agent's effort and ability, and the principal aims to induce full effort with minimum rewards. The agents may observe one another's effort based on an exogenous network and endogenous sequence. We study networks composed of stars, and find a simple algorithm to characterize the optimal sequence of performance. In a single star, less capable periphery agents precede their center while more capable ones succeed their center. In complex networks consisting of multiple stars, periphery agents precede their center early in the sequence but succeed their center late in the sequence. When the number of peripheries differ across stars, a “V-shape” emerges: agents in large stars are placed towards both ends of the sequence, while those in small ones towards the middle.
We analyze a principal-agent model to examine how peer information affects the optimal sequence for teamwork. The agents work on a joint project, each responsible for an individual task. The principal chooses a sequence of performance and rewards upon success of the project. The probability of success depends on each agent's effort and ability, and the principal aims to induce full effort with minimum rewards. The agents may observe one another's effort based on an exogenous network and endogenous sequence. We study networks composed of stars, and find a simple algorithm to characterize the optimal sequence of performance. In a single star, less capable periphery agents precede their center while more capable ones succeed their center. In complex networks consisting of multiple stars, periphery agents precede their center early in the sequence but succeed their center late in the sequence. When the number of peripheries differ across stars, a “V-shape” emerges: agents in large stars are placed towards both ends of the sequence, while those in small ones towards the middle.
Competition, Reputation and Survival [PDF]
This paper studies a duopoly exit game under a perfect good news learning process, in which each firm is unaware of any firm's quality but can observe both firms' reputations. A firm incurs flow costs when operating in the market; the firm's revenue depends on both its own reputation and the competitor's. When both firms have the same initial reputations, the pure strategy Nash equilibria are asymmetric with the firms exiting the market at different times; in the symmetric mixed strategy Nash equilibrium, both firms exit at an increasing exiting rate. In contrast, when the firms have different initial reputations, the unique subgame perfect Nash equilibrium requires that the firm with a higher reputation outlasts the firm with a lower reputation.
This paper studies a duopoly exit game under a perfect good news learning process, in which each firm is unaware of any firm's quality but can observe both firms' reputations. A firm incurs flow costs when operating in the market; the firm's revenue depends on both its own reputation and the competitor's. When both firms have the same initial reputations, the pure strategy Nash equilibria are asymmetric with the firms exiting the market at different times; in the symmetric mixed strategy Nash equilibrium, both firms exit at an increasing exiting rate. In contrast, when the firms have different initial reputations, the unique subgame perfect Nash equilibrium requires that the firm with a higher reputation outlasts the firm with a lower reputation.
Research in Progress
Competitive Nonlinear Pricing for Signals