Abstract We study security-bid auctions in which bidders compete for an asset by bidding with securities whose payments are contingent on the asset’s realized value and can covertly acquire information at some cost before participating in an auction. We first consider auctions with ordered securities in which the seller restricts the security design to an ordered set and uses a first- or second-price auction. We show that steeper securities give agents lower marginal return to information and may yield lower revenues. We then study linear mechanisms in which payments linearly depend on the asset’s realized value. We show that the revenue-maximizing linear mechanism assigns the asset efficiently, and the winner pays in cash if their expected values are high and pays in stock if their expected values are low. This result implies that the use of cash payment is positively correlated to synergies in merges and acquisitions. We empirically test this implication and find consistent results.
Endogenous Labor Market Cycles (with Cheng Wang) (Mar. 2021), Conditionally accepted at International Economic Review
Abstract We offer a new way of thinking about labor market fluctuations. In a perfectly stationary physical environment of the labor market, moral hazard and competition in long-term contracting generate cycles in market tightness, which may induce job creation and destruction, and two-period and longer cycles in wages and employment. Long-term contracts use termination as an incentive device. Underlying the cycles is a negative externality that each current period long-term contract’s prescription of termination puts on all next period long-term contracts’ prescription of termination by affecting the tightness of the market for long-term contracts in the next period.
Abstract An intermediary must make a decision on behalf of a group of agents, who are privately informed about their valuations attached to decisions. Examples include the government acting as an intermediary in the provision of public goods. We show that an imperfectly informed intermediary can help achieve an ex post efficient decision. We propose a cross-subsidization mechanism that implements an efficient decision. A condition on the intermediary’s information that ensures efficiency is characterized. Our results provide a rationale for the government’s involvement in public good projects based on information.
An Efficient Ascending Auction (Oct. 2016)
Abstract This paper proposes an ascending auction that yields an efficient outcome when the seller is restricted to sell bundles whose elements form a basis of a matroid and agents have interdependent values. This ascending auction generalizes Bikhchandani et al. (2011) who assume agents have independent private values; and Perry and Reny (2005) who study multi-unit good auctions. The key feature of the auction is that agents are permitted to express different demands against different elements.
Mechanism Design with Financially Constrained Agents and Costly Verification, Theoretical Economics, 16.3 (2021): 1139-1194.
Mechanism Design with Costly Verification and Limited Punishments, Journal of Economic Theory, 186 (2020): 105000.
Efficient Mechanisms with Information Acquisition, Journal of Economic Theory, 182 (2019): 279-328.
Approximation in Mechanism Design with Interdependent Values, Games and Economic Behavior, 103 (2017): 225-253. (A one-page abstract of an earlier version of this paper appeared in Proceedings of the 14th ACM Conference on Electronic Commerce. ACM, pp. 675-676.)