Here you will find some of my recent research papers. Most are works in progress or are under revision. Please feel welcome to contact me if you are interested in a paper that is not available for download. Comments, suggestions, and corrections are appreciated.
Time Horizons, Lattice Structures, and Welfare in Multi-period Matching Markets (with Sangram V. Kadam)
|abstract||We examine a T-period, bilateral matching economy without monetary transfers. Under natural restrictions on agents' preferences, which accommodate switching costs, status-quo bias, and other forms of inter-temporal complementarity, dynamically-stable matchings exist. We examine the consequences of manipulating the market's time horizon on the set of stable outcomes and we investigate this set's lattice structure. Generally, the stable set is not a lattice and "optimal" stable matchings may not exist; however, under a suitable partial order that is related to agents' preferences it exhibits that structure. The welfare properties of different stable outcomes is ascertained and the implications for normative market-design are discussed.||download||[ pdf ] Working Paper (Coming Soon).|
Multi-period Matching (with Sangram V. Kadam)
|abstract||We examine a multi-period, two-sided matching market without monetary transfers. Sufficient conditions for the existence of a dynamically-stable matching are proposed. These conditions accommodate status-quo bias, switching costs, and other contributors to inter-temporal complementarities in preferences. Though intuitive, repeated "spot markets" are often unable to assure a dynamically-stable outcome. We extend our analysis to incorporate imperfect information and path-dependent learning. Exchange after the revelation of new information is often not Pareto-improving, suggesting a fundamental fragility of interim markets. We relate our analysis to market unraveling, to the exposure problem, and to the importance of commitment, or lack thereof, in dynamic markets.||download||[ pdf ] Working Paper (August 10, 2014).|
Rules and Standards when Compliance Costs are Private Information (with David A. Weisbach and Richard J. Zeckhauser)
|abstract||A regulator, seeking to maximize net benefits, must choose between rules and standards, and then set a level of care. The regulated agents have private information about their compliance costs. Rules are set ex ante, so agents know the required level of care. Standards are established after agents have taken initial actions, in anticipation of the regulating bureau's directive. Those actions allow the bureau to make inferences about agents' costs, and thus set more appropriate requirements. Standards, however, expose agents to adjustment costs when they misjudge the required level of care before it is set. Nuanced tradeoffs emerge. Standards are relatively more attractive when adjustment costs are low and compliance costs are more uncertain. If some agents are large relative to the market, those agents will choose their actions strategically to influence the ultimate standard. Rules, by contrast, are immune to strategic posturing. We discuss applications to financial regulation.|
Signaling with Audits: Mimicry, Wasteful Expenditures, and Non-Compliance in a Model of Tax Enforcement (with David A. Weisbach and Richard J. Zeckhauser)
|abstract||The audit policy of a tax authority can signal its audit effectiveness. We model this process and show that in limited circumstances an ineffective authority can masquerade as being effective. We show that high maximal penalties imply underreporting of income.||download||[ link ] HKS Faculty Research Working Paper RWP14-001 (January 27, 2014).|
If Many Seek, Ye Shall Find: Search Externalities and New Goods (with Richard J. Zeckhauser)
|abstract||Consumer search serves productive roles in an economy with multiple goods. In equilibrium, search promotes the sorting of consumers among producers, thereby enabling the market for new goods, and potentially increasing welfare and profits above the benchmark case (an economy with a single good, hence no search). Additional direct competitors, when competitors are few, may benefit a firm, as more sellers may encourage more consumers to search. Conversely, consumer search entices producers of new goods to enter. Neither of these externalities, nor the coordination problems faced by consumers and producers, is appropriately recognized in the literature.||download||[ pdf ] Working Paper (August 10, 2014).
[ pdf ] Presentation Slides (June 1, 2014).
Trading Networks and Equilibrium Intermediation (with C. Matthew Leister)
|abstract||We consider a network of intermediaries facilitating exchange between buyers and a seller. Intermediary traders face a private trading cost, a network characterizes the set of feasible transactions, and an auction mechanism sets prices. We examine stable and equilibrium networks. Stable networks, which are robust to agents' collusive actions, exist when cost uncertainty is acute and multiple, independent trading relationships are valuable. A free-entry process governs the formation of equilibrium networks. Such networks feature too few intermediaries relative to the optimal market organization and they exhibit an asymmetric structure amplifying the shocks experienced by key intermediaries. Welfare and empirical implications of stable and equilibrium networks are investigated.||download||[ pdf ] Working Paper (June 10, 2014).|
First-Price Auctions with Budget Constraints
|abstract||Consider a first-price sealed-bid auction where participants have affiliated valuations and private budget constraints; that is, bidders have private multidimensional types. This article investigates the existence and nature of monotone equilibria in this setting. Hard budget constraints introduce two competing effects on bidding. The direct effect depresses bids as participants hit their spending limit. The strategic effect encourages more aggressive bidding by participants with large budgets. Together these effects can yield discontinuous equilibrium strategies stratifying competition along the budget dimension. The strategic consequences of private budget constraints can be a serious confound in interpreting bidding behavior in auctions.||download||[ pdf ] Working Paper (March 23, 2013).
[ pdf ] Presentation Slides (March 2013).
Engineered Ambiguity in the Principal-Agent Problem
|abstract||We consider a principal-agent problem with moral hazard. The agent is ambiguity averse and the principal can be ambiguous concerning the contract's evaluative criteria. For example, the contract may promise a reward if output is "sufficiently high" but may not precisely specify what the appropriate threshold is or how it is/will be determined. Although ambiguity makes it more difficult to secure the agent's participation, the principal can exploit it to relax incentive constraints. We show that the optimal contract features ambiguity and allows the principal to implement an action at strictly lower cost than with a fully precise contract. When employing a vague contract the principal has added incentive to conceal the benefits she derives from the principal-agent relationship.|
|download||[ pdf ] Working Paper (Coming Soon).|
On Asymmetric Reserve Prices
|abstract||We investigate equilibrium bidding in standard auctions with asymmetric reserve prices. For example, the auctioneer sets a low reserve price for one subset of bidders and a high reserve price for others. In the first-price auction we identify an equilibrium reserve price externality whereby bidders facing a high reserve price benefit from a reduction of opponents' reserve prices. We also document cases where introducing asymmetric reserve prices can increase the auctioneer's expected revenue compared to an optimal uniform reserve price - even if all bidders are ex ante identical. An extension of the model characterizes equilibrium bidding in asymmetric first-price auctions with asymmetric reserve prices. The use of asymmetric reserve prices in auction design is discussed.||download||[ pdf ] Working Paper (April 6, 2014).|
First-Price Auctions with Budget Constraints: An Experiment
|download||[ pdf ] Working Paper. Currently under revision, please e-mail me if you are interested in the latest version. (March 2010)|
The War of Attrition and the Revelation of Valuable Information (with Fei Li)
|publication||[ link ] Economics Letters 124:420-423, 2014.||download||[ pdf ] Working Paper (June 11, 2014).|
Audits as Signals (with David A. Weisbach and Richard J. Zeckhauser)
|publication||[ link ] University of Chicago Law Review 81(1):179-202, 2014.||download||[ link ] University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 651 (August 16, 2013).|
On the Continuous Equilibria of Affiliated-Value, All-Pay Auctions with Private Budget Constraints (with Fei Li)
|publication||[ link ] Games and Economic Behavior 85C:84-108, 2014.|
|download||[ link ] PIER Working Paper 14-001 (January 10, 2014).|
Bribing in First-Price Auctions: Corrigendum (with Shiran Rachmilevitch)
|publication||[ link ] Games and Economic Behavior (Forthcoming).|
|download||[ pdf ] Working Paper (February 15, 2013).|
Auction Choice for Ambiguity-Averse Sellers Facing Strategic Uncertainty: Comment
|publication||[ link ] Games and Economic Behavior 72(2):448-451, 2011.|
|download||[ pdf ] Working Paper (July 10, 2010).|
Hull Clubs and British Maritime Insurance, 1720-1840
|abstract||In the late 1700s and early 1800s, "hull clubs" or mutual insurance associations emerged as providers of marine insurance in Britain. While playing a tertiary role to the private underwriting at Lloyd's and to the insurance companies, the not-for-profit hull clubs were capable of offering their members competitively priced and comprehensive coverage. Despite their benefits, hull club insurance became de jure only among certain classes of shipping, such as colliers from the North-East. Two complementary factors led to hull clubs' sectoral concentration. First, clubs specialized in providing time policies, which were especially attractive to shipping engaged in high frequency trade. Second, the price uncertainty associated with club insurance made it a "riskier" purchase than commercially available policies. Examining the risk preferences of club members suggests that they exhibited a remarkably low level of risk aversion. These reinforcing factors contributed to hull clubs' niche status in the early nineteenth century maritime insurance market and constrained their initial growth.|
|download||[ pdf ] Working Paper (March 20, 2007).|
|data||[ xls ] Insurance Rates at Lloyd's of London by Shipping Route (1810-16).
[ xls ] Rates and Accounts of Hull Clubs in N.E. England (1810-35).
[ xls ] Ships Insured in the Coal Trade Association, South Shields (1828).
|notes||This paper was written for the economic history requirement in the PhD program at UC Berkeley. I have not worked on this paper since 2007. It is made available as a service for others who may be interested in exploring this topic further. The history of insurance is fascinating!|
|abstract||Voucher auctions are non-standard mechanisms that can be used to quickly allocate shares of multiple items among rivalrous parties. Variants of such mechanisms have been employed in the mass privatizations in Eastern and Central Europe. Despite their use, voucher auctions as mechanisms in their own right have received little theoretical or experimental attention. This pa- per considers simple voucher auctions, characterizes equilibria, and examines their performance in a controlled laboratory setting. Voucher auctions are shown to have intuitively appealing and well-behaved equilibria. Experiments suggest that they are a useful alternative mechanism when optimal schemes are either infeasible or unknown.|
|download||[ pdf ] Working Paper (November 23, 2009).|
|data||[ xls ] Data from the experiments.|
|supplements||[ pdf ] Poster (Presented at the Jerusalem Summer School in Economic Theory, June 2009).
[ pdf ] Presentation Slides for the Midwest Economics Association Meeting (Evanston, 2010) and the IAES Meeting (Prague, 2010).