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Here you will find some of my recent research papers. Many of the papers below are still 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 directly. Comments, suggestions, and corrections are greatly appreciated.
Trading Networks and Equilibrium Intermediation (with C. Matthew Leister)
| abstract | We consider a network of intermediaries facilitating exchange between a buyer 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 investigate stable and equilibrium network configurations. Bottlenecks in the trading network arise naturally in a free-entry competitive equilibrium and equilibrium markets organize into an asymmetric structure with many traders near the buyer and fewer traders near the seller. Such asymmetries can render equilibrium markets fragile by amplifying the shocks experienced by key intermediaries in the economy. | download | [ pdf ] Working Paper (5 June 2012). Revise and resubmit at Review of Economic Studies. |
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 (26 July 2012). I intend to post a revision sometime before June 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, but 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 (6 April 2013). |
On the Continuous Equilibria of Affiliated-Value, All-Pay Auctions with Private Budget Constraints (with Fei Li)
| abstract | We consider all-pay auctions in the presence of interdependent, affiliated valuations and private budget constraints. For the sealed-bid, all-pay auction we characterize a symmetric equilibrium in continuous strategies for the case of N bidders and we investigate its properties. Budget constraints encourage more aggressive bidding among participants with large endowments and intermediate valuations. We extend our results to the war of attrition where we show that budget constraints lead to a uniform amplification of equilibrium bids among bidders with sufficient endowments. An example shows that with both interdependent valuations and private budget constraints, a revenue ranking between the two mechanisms is generally not possible. | download | [ link ] Working Paper (23 April 2012). Revise and resubmit at Games and Economic Behavior. |
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) |
Bribing in First-Price Auctions: Corrigendum (with Shiran Rachmilevitch)
| publication | [ link ] Games and Economic Behavior (Forthcoming). |
| download | [ pdf ] Working Paper (15 February 2013). |
Auction Choice for Ambiguity-Averse Sellers Facing Strategic Uncertainty: Comment
| publication | [ link ] Games and Economic Behavior 72.2 (2011): 448-451. |
| download | [ pdf ] Working Paper (10 July 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 (20 March 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! |
Voucher Auctions
| 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 (23 November 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 MEA Meeting [Evanston, 2010] and the IAES Meeting [Prague, 2010] |