WORKING PAPERS

• “Coarse Information Design” [November, 2024] (Job Market Paper)

  joint with Qianjun Lyu and Wing Suen

  R&R at Journal of Political Economy

  ABSTRACT: We study an information design problem with continuous state and discrete signal space. Under convex value functions, the optimal information structure is interval-partitional and exhibits a dual expectations property: each induced signal is the  conditional mean (taken under the prior density) of each interval; and each interval cutoff is the conditional mean (taken under the value function curvature) of the interval formed by neighboring signals.  This property enables an examination into which part of the state space is more finely partitioned. The analysis can be extended to general value functions and  adapted to study coarse mechanism design.

• "Complete Contracts under Incomplete Information" [November, 2024]

  joint with Gregorio Curello and Qianjun Lyu

  ABSTRACT: We study a moral hazard model in which the output is stochastically determined by both the agent's hidden effort and an uncertain state of the world. We investigate how the contractibility of the ex-post realization of states affects the principal's incentive to provide information. While detailed information allows the principal to better tailor the effort levels to the revealed states, coarser information enables the principal to base payments on the ex-post realization of states, thereby designing incentive schemes more effectively. Our main result establishes that when the state is contractible, full information is never optimal; however, when the state is not contractible, full information is optimal under mild conditions.

• “Consumers' Trust in Multi-attribute Experience-good Seller” [October, 2024]

  joint with Yuk-fai Fong, Ting Liu and Xiaoxuan Meng

  ABSTRACT: A monopolist sells experience goods with observable and experience attributes. The attributes are termed complements (substitutes) if increasing one attribute raises (lowers) the marginal value of the other. The equilibrium observable attribute increases (decreases) in the seller’s discount factor when the two attributes are complements(substitutes). For products with both experience attributes, turning one of them observable can lower the remaining experience attribute and the profit. Committing to myopically sub-optimal levels on the observable attribute can promote consumers’ trust and raise the profit. Our theory also suggests that an exogenously imposed minimum quality standard can undermine trust building when attributes are substitutes.

• “Label the Divorced: A Repeated-Game Analysis on (Re)Marriage Market” [November, 2024]

  joint with Yuk-fai Fong, Xiaoxiao Hu and Xiaoxuan Meng

  ABSTRACT: We study the marriage and remarriage market in a repeated-game framework with potentially alternating partners. We show that compared with a label-less society, introducing marital labels by a credible institution can effectively replace inefficient punishment by transferable punishment, therefore achieving efficiency improvement. With the presence of marital labels, the most preferred centralized matching protocol is to arrange as many bachelor-divorced marriage as possible. We also characterize equilibrium behavior for a decentralized society where marital status is either observable or unobservable at dating stage. Welfare comparison across social institutions with various degrees of labels transparency is conducted.