Job Market Paper

Monopoly and Competition in the Market for Information (pdf)

This paper considers the generation and provision of data products in markets for information. Buyers face a decision problem with the uncertainty of two states. They can purchase experiments to augment their private information. A buyer’s willingness to pay for an experiment depends on his private information. To generate these experiments, sellers have to make an investment, which determines the most informative experiment a seller can provide. Sellers then post menus of experiments and prices. We characterize the optimal menu given any investment level and derive the optimal investment. When two sellers compete with investment, we find a splitting equilibrium in which sellers split the market. One seller only serves to low belief buyers and the other serves to high belief buyers. Each seller specializes in generating a more informative signal about one state. Monopoly seller provides more informative experiments, and to more buyers, than the case of duopoly competition.

Working Papers

Preferential Attachment as an Information Cascade in Emerging Networks (with Ahmed M. Alaa and Mihaela van der Schaar, 2017, pdf)

Preferential attachment is the foundational mechanism for the growth of many real-world social networks. Networks grown via preferential attachment exhibit the “rich-get-richer” phenomena. In this paper, we develop a Bayesian social learning model to characterize preferential attachment as an information cascade in social networks with incomplete information. Agents arriving sequentially to a network judge the qualities of predecessor agents based on their own private signals, and based on public signals (reputations) that are inferred from the network structure. We show that preferential attachment emerges endogenously as a sequentially rational equilibrium of the social learning process, where agents may engage in a (rational) herd behavior that parallels the Bandwagon bias, and form links with the most connected agents ignoring their private signals since those agents have the best “reputation”. Our results indicate that nonlinear preferential attachment, which is empirically observed in many citations and collaboration networks, emerges in the equilibrium networks when the agents’ private beliefs are unbounded.


Investment Risk and Bank Run (with Ho-Mou Wu and Hang Liu, 2015, pdf)

We consider banks’ investment choice and its influence on the occurrence of bank run. By introducing risky assets to the classic Diamond-Dybvig bank run model, we show that banks tend to invest more in risky assets after receiving the deposit. Then we use a global game approach to refine the multi-equilibria. When depositors are coordinated by private signals, we show the existence and uniqueness of bank run equilibrium, in which the occurrence of bank run is endogenously determined by fundamentals. Bank run is more likely to happen when the risky asset riskier.


In Preparation

Dynamic Oligopoly in a Changing Environment

This paper analyzes the oligopoly competition in a market with changing demand. Firms compete in a market by choosing quantities. The market demand is changing according to an unknown Markov process. Firms use quantity choice as a strategic experimentation to learn the demand, while quantities also affect firms’ profits. I illustrate the trade-off between the exploitation of profit in the short run and the exploration of information in the long run, and how it oligopolies’ incentive to collude. I characterize the Markov perfect equilibrium in the continuous time game and show how the incentive to collude changes with demand fluctuations, the value of information, and the fundamentals in an economy.

Information Design in Contests (with Daehyun Kim)

We study an information design problem in a contest model, where the designer of the contest has an informational advantage over agents’ ability. In our model, there is a strong agent (res. weak agent) who has a higher ex-ante probability of being the high type (res. low type). We find the optimal disclosure policy in which the designer discriminates two types of agents.


Other Writings

A Survey on “Robustness” in Mechanism Design and Contracting (in Chinese), Review of New Political Economics, vol. 33. Oct. 2017.