Copyright (c) 2008 All rights reserved. http://works.bepress.com/hao_li Recent documents in hao li en-us Thu, 03 Jan 2008 02:09:32 PST 3600 http://works.bepress.com/hao_li/20 http://works.bepress.com/hao_li/20 Thu, 25 Oct 2007 16:33:19 PDT We study a model of collective decision making in which divergent preferences of the agents make information aggregation impossible in a single round of voting. With costly delay, we show that repeated voting can help the agents reach a mutually preferred decision, even though there is no new direct information about the decision between two rounds of voting. An increase in the cost of delay can improve the efficiency of information aggregation, and hence the ex ante welfare of the agents involved, by encouraging the agents to be more forthcoming with their private information in the initial rounds of voting. Allowing an additional round of voting in case of disagreements can similarly improve the ex ante welfare when there is an intermediate degree of conflict, but reduces the welfare otherwise. With sufficiently many rounds of voting allowed, the equilibrium play of the repeated voting game involves gradually increasing concessions. Ettore Damiano making decisions in organizations http://works.bepress.com/hao_li/19 http://works.bepress.com/hao_li/19 Sat, 10 Feb 2007 10:15:44 PST We present a model of timing of seasonal sales where stores choose several designs at the beginning of the season without knowing which one, if any, will be fashionable. Fashionable designs have a chance to fetch high prices in fashion markets while non-fashionable ones must be sold in a discount market. In the beginning of the season, stores charge high prices in the hope of capturing their fashion market. As the end of the season approaches with goods still on the shelves, stores adjust downward their expectations that they are carrying a fashionable design, and may have sales to capture the discount market. Having a greater number of designs induces a store to put one of them on sales earlier to test the market. Moreover, price competition in the discount market induces stores to start sales earlier because of a greater perceived first-mover advantage in capturing the discount market. More competition, perhaps due to decreases in the cost of product innovation, makes sales occur even earlier. These results are consistent with the observation that the trend toward earlier sales since mid-1970's coincides with increasing product varieties in fashion good markets and increasing store competition. pascal courty pricing and timing http://works.bepress.com/hao_li/18 http://works.bepress.com/hao_li/18 Fri, 09 Feb 2007 21:07:16 PST In a dynamic model of sports competition, we show that when spectators care only about the level of effort exerted by contestants, rewarding schemes that depend linearly on the final score difference provide more efficient incentives for efforts than schemes based only on who wins and loses. This result is puzzling because rank order schemes are the dominant forms of reward in sports competitions. The puzzle can be explained if one takes into account the fact that spectators also care about the suspense in the game. We define spectators' demand for suspense as greater utility derived from contestants' efforts when the game is closer. As the demand for suspense increases, so does the advantage of rank order schemes relative to linear score difference schemes. When the demand for suspense is sufficiently high, the optimal rank order scheme dominates all linear score difference schemes, and with plausible additional restrictions, it dominates a broad class of incentive schemes that reward contestants on the basis of the final score difference. william chan designing contracts http://works.bepress.com/hao_li/17 http://works.bepress.com/hao_li/17 Fri, 09 Feb 2007 21:04:06 PST Though individuals prefer to join groups with high quality peers, there are also advantages from being high up in the pecking order within the group. We show that sorting of agents in this environment results in an overlapping interval structure in the type space. Segregation and mixing coexist in a stable equilibrium. A greater degree of egalitarianism within organizations leads to greater segregation across organizations. Policies that are effective for lower-quality organizations to attract talent may be counterproductive for higher-quality organizations to retain talent. The degree and the pattern of segregation are shown to depend also on whether higher types are less concerned with relative ranking within the organization, on relative size of organizations, and on the extent of idiosyncratic preferences for other organizational attributes. ettore damiano sorting http://works.bepress.com/hao_li/16 http://works.bepress.com/hao_li/16 Fri, 09 Feb 2007 21:01:59 PST Though individuals prefer to join groups with high quality peers, there are advantages to being high up in the pecking order within a group if higher ranked members of a group have greater access to the group's resources. When two organizations try to attract members from a fixed population of heterogeneous agents, how resources are distributed among the members according to their rank affects how agents choose between the organizations. Competition between the two organizations has implications for both the equilibrium sorting of agents and the way resources are distributed within each organization. To compete more intensely for the more talented agents, both organizations are selective and give no resources to their low ranks. In both organizations, higher ranks are rewarded with more resources, with a greater rate of increase in the organization that has a lower average quality in equilibrium. ettore damiano sorting http://works.bepress.com/hao_li/15 http://works.bepress.com/hao_li/15 Fri, 09 Feb 2007 20:59:42 PST This paper considers a model of a rating agency with multiple clients. ach client has a separate market (end-user of the rating); the only connection among them is that the underlying qualities of the clients are correlated. In the benchmark case of individual rating, the market for each client does not know the ratings for other clients. In centralized rating, the agency rates all clients together and shares the rating information among all markets. In decentralized rating, the ratings are again shared among all markets, but each client is rated by a self-interested rater of the agency with no access to the quality information of other clients. Both centralized rating and decentralized rating weakly dominate individual rating for the agency. When the underlying qualities are weakly correlated, centralized rating can dominate decentralized rating, but the reverse holds when the qualities are strongly correlated. ettore damiano signaling http://works.bepress.com/hao_li/14 http://works.bepress.com/hao_li/14 Fri, 09 Feb 2007 20:55:49 PST When employers cannot tell whether a school truly has many good students or just gives easy grades, schools have an incentive to inflate grades to help mediocre students, despite concerns about preserving the value of good grades for good students. We construct a signaling model where grades are inflated in equilibrium. The inability to commit to an honest grading policy reduces the informativeness of grades and hurts schools. Grade inflation by one school makes it easier for another school to fool the market with inflated grades. Easy grades are strategic complements, providing a channel to make grade exaggeration contagious. william chan signaling http://works.bepress.com/hao_li/13 http://works.bepress.com/hao_li/13 Fri, 09 Feb 2007 20:52:30 PST We study how matchmakers use prices to sort heterogeneous participants into competing matching markets, and how equilibrium outcomes compare with monopoly in terms of prices, matching market structure and sorting efficiency under the assumption of complementarity in the match value function. The role of prices to facilitate sorting is compromised by the need to survive price competition. We show that price competition leads to a high quality market that is insufficiently exclusive. As a result, the duopolistic outcome can be less efficient in sorting than the monopoly outcome in terms of total match value in spite of servicing more participants. ettore damiano matching and pricing http://works.bepress.com/hao_li/12 http://works.bepress.com/hao_li/12 Fri, 09 Feb 2007 20:36:59 PST This paper considers the problem of a monopoly matchmaker that uses a schedule of entrance fees to sort different types of agents on the two sides of a matching market into different markets, where agents randomly form pairwise matches. We make the standard assumption that the match value function exhibits complementarities, so that matching types at equal percentiles maximizes total match value. We provide necessary and sufficient conditions for the revenue-maximizing market structure to be efficient. These conditions require complementarities in the match value function to be sufficiently strong along the efficient matching path. ettore damiano matching and pricing http://works.bepress.com/hao_li/11 http://works.bepress.com/hao_li/11 Fri, 09 Feb 2007 20:30:31 PST We consider a two-sided, finite-horizon model of search and matching with heterogeneous types and complementarity between types. The quality of the pool of potential matches deteriorates as agents who have found mutually agreeable matches exit the market. With automatic participation of all agents in each round, the market performs a sorting function in that attractive types of agents have multiple chances to meet and match with their peers. However, the sorting function of the market is lost if agents incur an arbitrarily small cost in order to participate in each round. The market unravels as almost all agents rush to participate in the first round and match and exit with anyone they meet. ettore domiano matching and timing