Recent Publications:
"Near" Weighted Utilitarian Characterizations of Pareto Optima (with Jinwoo Kim, Fuhito Kojima, and Chris Ryan), Econometrica, forthcoming.
Abstract: We characterize Pareto optimality via “near” weighted utilitarian welfare maximization. One characterization sequentially maximizes utilitarian welfare functions using a finite sequence of nonnegative and eventually positive welfare weights. The other maximizes a utilitarian welfare function with a certain class of positive hyperreal weights. The social welfare ordering represented by these “near” weighted utilitarian welfare criteria are characterized by the standard axioms for weighted utilitarianism under a suitable weakening of the continuity axiom.
Prolonged Learning and Hasty Stopping: the Wald Problem with Ambiguity (with Sarah Auster and Konrad Mierendorff), American Economic Review, forthcoming.
Abstract: This paper studies sequential information acquisition by an ambiguity-averse decision maker (DM), who decides how long to collect information before taking an irreversible action. The agent optimizes against the worst-case belief and updates prior by prior. We show that the consideration of ambiguity gives rise to rich dynamics: compared to the Bayesian DM, the DM here tends to experiment excessively when facing modest uncertainty and, to counteract it, may stop experimenting prematurely when facing high uncertainty. In the latter case, the DM’s stopping rule is non-monotonic in beliefs and features randomized stopping.
The Effect of Privacy Regulation on the Data Industry: Empirical Evidence from GDPR (with Guy Aridor and Tobias Salz), RAND Journal of Economics, forthcoming.
Abstract: Utilizing a novel dataset from an online travel intermediary, we study the effects of the EU’s General Data Protection Regulation (GDPR). The opt-in requirement of GDPR resulted in a 12.5% drop in the intermediary-observed consumers, but the remaining consumers are trackable for a longer period of time. Our findings imply that privacy-conscious consumers exert privacy externalities on opt-in consumers, making them more predictable. Consistent with this finding, the average value of the remaining consumers to advertisers has increased, offsetting some of the losses from consumer opt-outs.
Bailout Stigma (with Chongwoo Choe and Keeyoung Rhee), Journal of Finance, forthcoming.
Abstract: We develop a model of bailout stigma where accepting a bailout signals a firm’s balance-sheet weakness and worsens its funding prospect. To avoid stigma, a firm with high-quality legacy assets either withdraws from subsequent financing after receiving a bailout or refuses a bailout altogether to send a favorable signal. The former leads to a short-lived stimulation with a subsequent market freeze even worse than if there were no bailout. The latter revives the funding market, albeit with delay, to the level achievable without any stigma. Strikingly, a bailout offer is most effective when many firms reject it (to build a favorable reputation) rather than accept it.
Keeping the Listener Engaged: a Dynamic Model of Bayesian Persuasion (with Kyungmin Kim and Konrad Mierendorff), Journal of Political Economy, 2023. Slides. Recording: VSET (by Konrad Mierendorff).
Abstract: We consider a dynamic model of Bayesian persuasion in which information takes time and is costly for the sender to generate and for the receiver to process, and neither player can commit to their future actions. Persuasion may totally collapse in a Markov perfect equilibrium of this game. However, for persuasion costs sufficiently small, a version of a folk theorem holds: outcomes that approximate Kamenica and Gentzkow’s sender-optimal persuasion as well as full revelation and everything in between are obtained in Markov perfect equilibrium as the cost vanishes.
Stable Matching with Mistaken Agents (with Georgy Artemov and Yinghua He), Journal of Political Economy Microeconomics, 2023.
Abstract: Motivated by growing evidence of agents’ mistakes in strategically simple environments, we propose a solution concept—robust equilibrium—that requires only an asymptotically optimal behavior. We use it to study large random matching markets operated by applicant-proposing deferred acceptance. Although truth telling is a dominant strategy, almost all applicants may be nontruthful in robust equilibrium; however, the outcome must be arbitrarily close to the stable matching. Our results imply that one can assume truthful agents to study deferred acceptance outcomes theoretically or counterfactually. However, to estimate the preferences of mistaken agents, one should assume stable matching but not truth telling.
Prizes versus Contracts as Incentives for Innovation, (with Elisabetta Iossa and Patrick Rey), Review of Economic Studies, 2021.
Abstract: Procuring an innovation involves motivating a research effort to generate a new idea and then implementing that idea efficiently. If research efforts are unverifiable and implementation costs are private information, a trade-off arises between the two objectives. The optimal mechanism resolves the trade-off via two instruments: a cash prize and a follow-on contract. It primarily uses the latter, by favoring the innovator at the implementation stage when the value of the innovation is above a certain threshold and handicapping the innovator when the value of the innovation is below that threshold. A cash prize is employed as a supplementary incentive only when the value of innovation is sufficiently high. These features are consistent with current practices in the procurement of innovation and the management of unsolicited proposals.
Efficiency, Justified Envy, and Incentives in Priority-Based Matching, (with Atila Abdulkadiroğlu, Parag Pathak, Alvin Roth, and Olivier Tercieux), Appendix, American Economic Review: Insights, 2020.
Abstract: Top trading cycles (TTC) is Pareto efficient and strategy-proof in priority-based matching, but so are other mechanisms including serial dictatorship. We show that TTC minimizes justified envy among all Pareto efficient and strategy-proof mechanisms in one-to-one matching. In many-to-one matching, TTC admits less justified envy than serial dictatorship in an average sense. Empirical evidence from New Orleans OneApp and Boston Public Schools shows that TTC has significantly less justified envy than serial dictatorship.
Optimal Dynamic Allocation of Attention, (with Konrad Mierendorff), Appendix, American Economic Review, 2019.
Abstract: We consider a decision maker (DM) who, before taking an action, seeks information by allocating her limited attention dynamically over different news sources that are biased toward alternative actions. Endogenous choice of information generates rich dynamics: the chosen news source either reinforces or weakens the prior, shaping subsequent attention choices, belief updating, and the final action. The DM adopts a learning strategy biased toward the current belief when the belief is extreme and against that belief when it is moderate. Applied to consumption of news media, observed behavior exhibits an “echo-chamber” effect for partisan voters and a novel “anti-echo-chamber” effect for moderates.
Efficiency and Stability in Large Matching Markets (with Olivier Tercieux), Appendix, Journal of Political Economy, 2019.
Abstract: We study efficient and stable mechanisms in matching markets when the number of agents is large and individuals’ preferences and priorities are drawn randomly. When agents’ preferences are uncorrelated, then both efficiency and stability can be achieved in an asymptotic sense via standard mechanisms such as deferred acceptance and top trading cycles. When agents’ preferences are correlated over objects, however, these mechanisms are either inefficient or unstable, even in an asymptotic sense. We propose a variant of deferred acceptance that is asymptotically efficient, asymptotically stable, and asymptotically incentive compatible. This new mechanism performs well in a counterfactual calibration based on New York City school choice data.
Stable Matching in Large Economies (with Jinwoo Kim and Fuhito Kojima), Appendix, Econometrica, 2019.
Abstract: We study stability of two-sided many-to-one matching in which firms’ preferences for workers may exhibit complementarities. Although such preferences are known to jeopardize stability in a finite market, we show that a stable matching exists in a large market with a continuum of workers, provided that each firm’s choice is convex and changes continuously as the set of available workers changes. We also study the existence and structure of stable matchings under preferences exhibiting substitutability and indifferences in a large market. Building on these results, we show that an approximately stable matching exists in large finite economies. We extend our framework to ensure a stable matching with desirable incentive and fairness properties in the presence of indifferences in firms’ preferences.
Recommender Systems as Mechanisms for Social Learning, (with Johannes Hörner), Appendix, Quarterly Journal of Economics, 2018.
Abstract: This article studies how a recommender system may incentivize users to learn about a product collaboratively. To improve the incentives for early exploration, the optimal design trades off fully transparent disclosure by selectively over-recommending the product (or “spamming”) to a fraction of users. Under the optimal scheme, the designer spams very little on a product immediately after its release but gradually increases its frequency; she stops it altogether when she becomes sufficiently pessimistic about the product. The recommender’s product research and intrinsic/naive users “seed” incentives for user exploration and determine the speed and trajectory of social learning. Potential applications for various Internet recommendation platforms and implications for review/ratings inflation are discussed.
Selected Publication
Weak Cartel and Collusion-Proof Auctions, (with Daniele Condorelli and Jinwoo Kim), Journal of Economic Theory, 2018. supplementary material.
Payoff Equivalence of Efficient Mechanisms in Large Matching Markets, (with Olivier Tercieux), Theoretical Economics, 2018.
Disclosure and Legal Advice, (with Sergei Severinov), American Economic Journal: Microeconomics, 2017.
An Experimental Study of Sponsored Search Auctions, (with Syngjoo Choi and Jinwoo Kim), Games and Economic Behavior, 2017, supplementary material
Decentralized College Admissions, (with Youngwoo Koh), Journal of Political Economy, 2016. Supplementary Appendix.
Efficient Assignment with Interdependent Values, (with Jinwoo Kim and Fuhito Kojima), Journal of Economic Theory, 2015.
Expanding ‘Choice’ in School Choice, (with Atila Abdulkadiroglu and Yosuke Yasuda), American Economic Journal: Microeconomics, 2015.
Credit Market Speculation and the Cost of Capital, (with Rajiv Sethi), American Economic Journal: Microeconomics, 2014. [VOX-EU piece on the paper] formerly titled, Economic Consequences of Speculative Side Bets: the Case of Naked Default Swaps.
Generalized Reduced-Form Auctions: a Network Flow Approach, (with Jinwoo Kim and Konrad Mierendorff), Econometrica (2013), Supplementary Appendix.
Designing Random Allocation Mechanisms: Theory and Applications, (with Eric Budish, Fuhito Kojima, and Paul Milgrom), American Economic Review, 2013, Supplementary Appendix.
Pandering to Persuade, (with Wouter Dessein and Navin Kartik), American Economic Review, 2013, Supplementary Appendix.
Assigning Resources to Budget-Constrained Agents, (with Ian Gale and Jinwoo Kim), Review of Economic Studies, 2013, Supplementary Appendix.
Resolving Conflicting Preferences in School Choice: the Boston Mechanism Reconsidered, (with Atila Abdulkadiroglu and Yosuke Yasuda), American Economic Review, 2011.
Bidding with Securities: Comment, (with Jinwoo Kim), American Economic Review, 2010.
Asymptotic Equivalence of Probabilistic Serial and Random Priority Mechanisms, (with Fuhito Kojima), Econometrica, 2010.
Opinions as Incentives, (with Navin Kartik), Journal of Political Economy, 2009.
The NFL Should Auction Possession in Overtime Games, (with Terry Hendershott), The Economists’ Voice, 2009.
Optimal Collusion-Proof Auctions, (with Jinwoo Kim) Journal of Economic Theory, (2009)
Robustly Collusion-Proof Implementation, (with Jinwoo Kim), Econometrica, (2006)
A Dynamic Theory of Holdup, (with Jozsef Sakovics), Econometrica (2004)
Cooperative Investments and the Value of Contracting, (with Don Hausch), American Economic Review, 1999.
Optimal Design of Research Contests, (with Ian Gale), American Economic Review, 2003.
Caps on Political Lobbying, (with Ian Gale), American Economic Review, 1998.
Caps on Political Lobbying: Reply, (with Ian Gale), American Economic Review, 2006.
Optimal Incentives for Teams, (with S.-W. Yoo), American Economic Review, 2001.
Revenue Comparisons for Auctions When Bidders Have Arbitrary Types, (with Ian Gale), Theoretical Economics, 2006.
Standard Auctions with Financially Constrained Bidders, (with Ian Gale), Review of Economic Studies, 1998.
The Optimal Mechanism for Selling to Budget-Constrained Buyer, (with Ian Gale), Journal of Economic Theory, 2000.
Asymmetric Information about Rivals’ Types in Standard Auctions: An Experiment (with Jim Andreoni and Jinwoo Kim), Games and Economic Behavior, 2007.
Strategic Judgment Proofing, (with Kathryn Spier), RAND Journal of Economics, 2008.
The Role of Lockups in Takeover Contests (with Tracy Lewis), RAND Journal of Economics, 2007.
Competitive Procurement with Corruption, (with R. Burguet), RAND Journal of Economics, 2004.
Design Competition through Multidimensional Auctions, RAND Journal of Economics, 1993.