RESEARCH
Working Papers
(Job Market Paper, Presented at 2023 Midwest International Trade & Theory Conference at Atlanta, GA, (Slides) )
In public Bayesian persuasion, where persuasion signals must be broadcast, the optimal experiment chosen to persuade targeted Receivers may provide unnecessary information to some other Receivers with different prior beliefs. Such unnecessary information may cause these Receivers to switch to actions that the Sender favors less, resulting in over-persuasion. This study investigates when the over-persuasion issue arises and how mechanism design can resolve it. We design a mechanism in which contract transfer is contingent on signal realization. The Receivers can accept the contract to process the persuasion signals, or they can decline it and maintain their prior beliefs. Confirmation bias that arises from the Receivers' heterogeneous beliefs is exploited to create their heterogeneous incentives to accept the contract. When only the over-persuaded Receivers are discouraged from accepting the contract, the over-persuasion issue is resolved.
In a Bayesian persuasion game, when a Sender realizes he cannot immediately convince an inattentive Receiver to make a desirable decision immediately, he emphasizes persuading the Receiver to be persuadable in his next attempt. We show that the Sender may favor and choose sequential persuasions over static persuasions when the Receiver is rationally inattentive. The Sender designs experiments to increase the likelihood of a bad signal occurring in the current stage but make it less bad when it occurs to accommodate for the subsequent persuasion attempt. This tactic decreases the success rate of the current persuasion but creates or increases the Receiver's willingness to be persuaded again if the current persuasion attempt fails. If the Sender is permitted more persuasion attempts, the experiments he conducts during each attempt will transmit less information and lead to “piecemeal” information disclosure.
(Reject & Resubmission Invited at Management Science, Presented at 2023 INFORMS Annual Meeting at Phoenix, AZ)
In conspicuous consumption, if consumers lack information on actual demand, they are uncertain about the exclusivity for which they are willing to pay a premium. We show that the price set by a monopolistic seller who has full knowledge of demand distribution can serve as a signal for consumers to estimate the exclusivity of the product, which is essential for supporting conspicuous consumption. Conspicuous consumption supported by the price signal mechanism exhibits a conventional pattern of selling to fewer consumers at a higher markup. However, the nature of this mechanism tends to cause consumers to underestimate the conspicuous value, sometimes resulting in a loss for the seller or even the elimination of conspicuous consumption. Our findings are robust in contexts where consumer types are subject to binary and continuous distribution.
For conspicuous consumption to occur, certain price levels must exclude low-income consumers while retaining as many high-income consumers as possible to create exclusivity. This phenomenon necessitates the income effect if consumers with different incomes share similar preferences for a status good. However, as a result of the income effect, the direct value determined by the product quality and the conspicuous value determined by exclusivity may act as substitutes for consumers. Therefore, when a product becomes a status good, its quality may decrease. Consumers who purchase a good solely for its direct value may incur a loss, and the market may experience a decrease in efficiency. Moreover, the quality decline of a status good reduces the effectiveness of price as a signal of product quality, whereas a high price indicates only high quality if the good is an ordinary good under the same conditions.
Strategy of Information Disclosure, Receiver Heterogeneity and Mechanism Design
The Sender who decides how information is disclosed in a game can benefit by selling information, if additional information helps the Receivers make decisions, and by garbling the information, when these decisions are relevant to her payoff. These two objectives are usually not perfectly aligned, but they coexist, especially when Receivers have heterogeneous prior beliefs as private information, which motivates the Sender to design screening mechanisms. We investigate the optimal information disclosure strategy and its determinants in a bilateral trading game where the Sender has dual objectives and the Receivers have heterogeneous prior beliefs. We show that the screening mechanism is effective only when the Sender's primary objective is to sell information to some Receivers while still needing to persuade others. In other cases, the Sender either fully discloses the information or employs a non-discriminatory information-garbling strategy to persuade all Receivers.
Research in Progress
Partially Informed Agent and Persuading to Design a Mechanism
Price Discrimination after Information Discrimination
Counterfeiting as a Signal of Exclusivity in Conspicuous Consumption
Buying to Qualify: Manufactured Purchases and Scarcity Pricing in the Luxury Market