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6th Shanghai Microeconomics Workshop
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Program
June 12, 2015, Friday
6:30 pm Welcome Dinner, 2nd floor, Howard Johnson Caida Plaza
June 13, 2015, Saturday 8:20 am – 8:40 am Opening Ceremony (Guoqiang Tian), Room 511, School of Economics, SUFE
8:40 am – 9:00 am Group Photo
Session 1 (Chair: Yongchao Zhang), Room 807, School of Economics, SUFE
9:00 am – 9:45 am Yuxin Chen, New York University Shanghai
“Sequential Search with Refinement: Model and Application with
Click‐stream Data” (with Song Yao)
9:45 am – 10:30 am Jun Yu, Shanghai University of Finance and Economics
“Consumer Search with Price Sorting”
10:30 am – 11:00 am Tea Break
11:00 am – 11:45 am Alessandro Pavan, Northwestern University
“Platform Pricing under Dispersed Information” (with Bruno Jullien)
11:45 am – 12:30 pm Junjie Zhou, Shanghai University of Finance and Economics
“Platform Competition in Multi‐sided Markets” (with Guofu Tan)
12:30 pm – 2:30 pm Lunch
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Session 2 (Chair: Bingyong Zheng), Room 807, School of Economics, SUFE
2:30 pm – 3:15 pm Atsushi Kajii, Kyoto University
“On Continuity of Robust Equilibria” (with Ori Haimanko)
3:15 pm – 4:00 pm Jingfeng Lu, National University of Singapore
“Effort‐Maximizing Contingent Prize Allocation Rule in Three‐Battle
Contests” (with Xin Feng)
4:00 pm – 4:20 pm Tea Break
4:20 pm – 5:05 pm Fei Li, University of North Carolina‐Chapel Hill
“Revenue Management Without Commitment: Dynamic Pricing and
Periodic Fire Sales” (with Francesc Dilme)
5:30 pm Dinner
June 14, 2015, Sunday Session 3 (Chair: Qianfeng Tang), Room 807, School of Economics, SUFE
9:00 am – 9:45 am Hulya Eraslan, Rice University
“Uniqueness of Stationary Equilibrium Payoffs in Coalitional Bargaining
Among Risk Averse Players”
9:45 am – 10:30 pm Sambuddha Ghosh, Shanghai University of Finance and Economics
“Repeated Competing Mechanisms” (with Seungjin Han)
10:30 am – 11:00 am Tea break
11:00 am – 11:45 am Yeon‐Koo Che, Columbia University
“Optimal Design for Social Learning” (with Johannes Horner)
11:45 am – 12:30 pm Pak‐Hung Au, Nanyang Technological University
“Pay to Quit and Team Incentives”
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12:15 pm – 2:30 pm Lunch
Session 4 (Chair: Kang Rong), Room 807, School of Economics, SUFE
2:30 pm – 3:15 pm Marciano Siniscalchi, Northwestern University
“Sequential Preferences and Sequential Rationality”
3:15 pm – 4:00 pm Jian Li, McGill University
“Blackwell’s Informativeness Ranking with Uncertainty Averse Preferences”
(with Junjie Zhou)
4:00 pm – 4:20 pm Tea Break
4:20 pm – 5:05 pm Adam Wong, Shanghai University of Finance and Economics
“Nonlinear Pricing with Asymmetric Competition” (with Yong Chao and
Guofu Tan)
5:30 pm Dinner
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Map: Howard Johnson Hotel to School of Economics (SOE), about 0.3km
Map: Baolong Hotel to School of Economics (SOE), about 1.5km
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Abstracts
June 13th, 2015, Saturday
Session 1 (9:00 am – 12:30 pm; Chair: Yongchao Zhang), Room 807, School of Economics,
SUFE
9:00 am – 9:45 am, Yuxin Chen, New York University Shanghai
“Sequential Search with Refinement: Model and Application with Click-stream Data” (with
Song Yao)
Abstract:
We propose a structural model of consumer sequential search under uncertainty about attribute
levels of products. Our identification of the search model relies on exclusion restriction variables
that separate consumer utility and search cost. Because such exclusion restrictions are often
available in online click-stream data, the identification and corresponding estimation strategy is
generalizable for many online shopping websites where such data can be easily collected.
Furthermore, one important feature of online search technology is that it gives consumers the
ability to refine search results using tools such as sorting and filtering based on product attributes.
The proposed model can integrate consumers’ decisions of search and refinement. The model is
instantiated using consumer click-stream data of online hotel bookings provided by a travel
website. The results show that refinement tools have significant effects on consumer behavior
and market structure. We find that the refinement tools encourage 33% more searches and
enhance the utility of purchased products by 17%. Most websites by default rank search results
according to their qualities or relevance to consumers (e.g., Google). When consumers are
unaware of such default ranking rules, they may engage in disproportionately more searches
using refinement tools. Consequently, overall consumer surplus may deteriorate when search
cost outweighs the enhanced utility. In contrast, if the website simply informs consumers that the
default ranking already reflects product quality or relevance, consumers search less and their
surplus improves. We also find that refinement tools lead to a less concentrated market structure.
9:45 am – 10:30 am, Jun Yu, Shanghai University of Finance and Economics
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“Consumer Search with Price Sorting”
Abstract:
This paper introduces price sorting into a consumer search model. Either ascending or
descending price sorting can be applied before the sampling process. Consumers search
sequentially for products with two types of qualities. We allow a fraction of consumers to have
zero search costs, and all other consumers have the same positive search cost. Price dispersion
exists in the unique symmetric equilibrium. We find that, when the search cost is small, using
price sorting will improve both total welfare and consumer surplus, but have no impact on
industry profits. Moreover, if consumers can choose the type of price sorting for their own
interests, ascending price sorting (or descending price sorting, respectively) will be chosen if
there are more high-quality products (or low-quality products, respectively) in the market.
11:00 am – 11:45 am, Alessandro Pavan, Northwestern University
“Platform Pricing under Dispersed Information” (with Bruno Jullien)
Abstract:
We study monopoly and duopoly pricing in a two-sided market with dispersed information
about users’ preferences. First, we show how the dispersion of information introduces
idiosyncratic uncertainty about participation rates and how the latter shapes the elasticity of the
demands and thereby the equilibrium prices. We then study informative advertising campaigns
affecting the agents’ ability to estimate their own as well as other agents’ valuations, and product
design affecting the distribution of valuations on the two sides of the market.
11:45 am – 12:30 pm, Junjie Zhou, Shanghai University of Finance and Economics
“Platform Competition in Multi-sided Markets” (with Guofu Tan)
Abstract:
This paper provides a general model of platform competition allowing for more than two
platforms, more than two sides/groups and discrete choices of agents. We develop analytical
tools to analyze this general model (existence and uniqueness of participation equilibrium and
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comparative statics). In the symmetric model, we derive a simple equilibrium pricing rule:
price equals cost plus market power distortion minus cross subsidies. Group-specific price
accounts for different degree of total externalities of a group on all the other groups. Both market
power distortion and cross subsidies are decreasing in the number of platform. The net effect
depends on the degree of product differentiation and the size of externalities. Also we provide
comparative static analysis with respect to number of sides, number of platforms and different
noise distributions.
Session 2 (2:30 pm – 5:05 pm; Chair: Bingyong Zheng), Room 807, School of Economics,
SUFE
2:30 pm – 3:15 pm, Atsushi Kajii, Kyoto University
“On Continuity of Robust Equilibria” (with Ori Haimanko)
Abstract:
We relax the Kajii and Morris (1997a) notion of equilibrium robustness by allowing approximate
equilibria when information in a game becomes incomplete. The new notion is termed
"approximate robustness". The approximately robust equilibrium correspondence turns out to be
upper hemicontinuous, unlike the (exactly) robust equilibrium correspondence. Another
distinction comes to light when we show that, as a corollary of upper hemicontinuity,
approximately robust equilibria exist in all zero-sum games. Thus, although approximate
robustness is only a small variation of the original notion, it is strictly weaker than the latter, and
its adoption enriches the domain of games for which robust equilibria exist.
3:15 pm – 4:00 pm, Jingfeng Lu, National University of Singapore
“Effort-Maximizing Contingent Prize Allocation Rule in Three-Battle Contests” (with Xin Feng)
Abstract:
This paper studies the effort-maximizing prize allocation rules in sequentially played three-battle
contests. The organizer has a fixed prize budget, and rewards the players contingent on the
number of battles they win. The battles are played between two opposing players or between
selected pairs of players from two opposing teams. A full spectrum of contest technologies in the
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Tullock family is accommodated. We find a winner-take-all best-of-three contest is optimal for
team competitions. For competitions between two individuals, the optimal design varies with the
contest technology: when the discriminatory power is within the low range, a winner-take-all
best-of-three contest remains optimal; when the discriminatory power falls in the intermediate
and high ranges, the optimal design takes a form of best-of-three contest with both a contest
prize to the grand winner of the whole contest and uniform battle prizes to battle winners. For
intermediate range, the battle prize increases with the discriminatory power but never goes
beyond one-third of the total prize. For the high range, interestingly, a wide span of battle prizes
ranging from zero to one-third of the total prize is optimal. Therefore, in general additional
award should be allocated to the grand winner of the whole contest. Our findings thus rationalize
the commonly observed winner-take-all prize structure as well as intermediate prizes in
sequential multi-battle contests.
4:20 pm – 5:05 pm, Fei Li, University of North Carolina-Chapel Hill
“Revenue Management Without Commitment: Dynamic Pricing and Periodic Fire Sales” (with
Francesc Dilme)
Abstract:
We consider a market with a profit-maximizing monopolist seller who has K identical goods to
sell before a deadline. At each point of time, the seller posts a price and the quantity available but
cannot commit to future offers. Over time, potential buyers with different reservation values
enter the market. Buyers strategically time their purchases, trading off (1) the current price
without competition and (2) a possibly lower price in the future with the risk of being rationed.
We analyze equilibrium price paths and buyers’ purchases behavior in which prices decline
smoothly over the time period between sales and jump up immediately after a transaction occurs.
In equilibrium, high-value buyers purchasing on arrival. Crucially, the seller may periodically
liquidate part of his stock via fire sales before the deadline in order to secure a higher price in the
future. Intuitively, these sales allow the seller to ‘commit’ to high prices going forward. The
possibility of fire sales before the deadline implies that the allocation may be inefficient. The
inefficiency arises from the scarce good being misallocated to low-value buyers, rather than the
withholding inefficiency that is normally seen with a monopolist seller.
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June 15th, 2014, Sunday
Session 3 (9:00 am – 12:30 pm; Chair: Qianfeng Tang), Room 807, School of Economics,
Shanghai University of Finance and Economics
9:00 am – 9:45 am, Hulya Eranslan, Rice University
“Uniqueness of Stationary Equilibrium Payoffs in Coalitional Bargaining Among Risk Averse
Players”
Abstract:
We study a model of sequential bargaining in which, in each period before an agreement is
reached, the proposer’s identity is randomly determined, the proposer suggests a division of a pie
of size one, each other agent either approves or rejects the proposal, and the proposal is
implemented if the number of approving agents exceeds a threshold, and the agents have
concave utilities. We show that the stationary equilibrium expected payoffs of this bargaining
game are unique.
9:45 am – 10:30 pm, Sambuddha Ghosh, Shanghai University of Finance and Economics
“Repeated Competing Mechanisms” (with Seungjin Han)
Abstract:
This paper studies the repeated game where multiple principals compete to offer short-term
mechanisms to multiple agents repeatedly over time. A mechanism is sufficiently general to
make a principal's short-term action contingent on agents' messages that may reflect changes in
the market or agents' payoff types. In the case with no private information about agents' types,
there is no distinction between the repeated and one-shot game in terms of set of equilibrium
allocations: A principal's lower-bound of equilibrium payoffs is expressed as his maxmin value
over action space in both games.
In the case with private information about agents' types, there are significant differences. In the
repeated game, a weaker notion of incentive compatibility can be applied and the deviating
principal cannot do any better with offering an arbitrary mechanism off the path following his
deviation than he does with offering a single action. In contrast to the one-shot game, this allows
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us to express a principal's lower-bound of equilibrium payoff in the repeated game in terms of
model primitives: It is equal to his maxmin value over his action space and the other principals'
incentive compatible direct mechanisms conditional on the principal's action. This lower-bound
is lower than that in the one-shot setting. This and the weaker notion of incentive compatibility
imply that the repeated game supports more allocations in equilibrium.
11:00 am – 11:45 am, Yeon-Koo Che, Columbia University
“Optimal Design for Social Learning” (with Johannes Horner)
Abstract:
This paper studies the design of a recommender system for organizing social learning on a
product. To improve incentives for early experimentation, the optimal design trades off fully
transparent social learning by over-recommending a product (or “spamming”) to a fraction of
agents in the early phase of the product cycle. Under the optimal scheme, the designer spams
very little about a product right after its release but gradually increases the frequency of
spamming and stops it altogether when the product is deemed sufficiently unworthy of
recommendation. The optimal recommender system involves randomly triggered spamming
when recommendations are public—as is often the case for product ratings—and an information
“blackout” followed by a burst of spamming when agents can choose when to check in for a
recommendation. Fully transparent recommendations may become optimal if a
(socially-benevolent) designer does not observe the agents’ costs of experimentation.
11:45 am – 12:30 pm, Pak-Hung Au, Nanyang Technological University
“Pay to Quit and Team Incentives”
Abstract:
This paper examines the optimal compensation scheme, job design, and severance policy for a
team using a model of repeated moral hazard. In the optimal contract, the agent may be paid to
quit after a poor performance. We show that a generous severance policy facilitates the adoption
of team incentives and team-based production by making it cost-effective to implement peer
monitoring and sanction among the agents.
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Session 4 (2:30 pm – 5:05 pm; Chair: Kang Rong), Room 807, School of Economics, SUFE
2:30 pm – 3:15 pm, Marciano Siniscalchi, Northwestern University
“Sequential Preferences and Sequential Rationality”
Abstract:
Sequential rationality is the central notion of optimality in dynamic games. It requires that
players maximize their continuation payoff even at information sets to which they assign zero
probability. This paper is concerned with the revealed-preference foundations of sequential
rationality. Two issues must be addressed. First, the strategies players plan to follow are not
directly observable. Second, conditional beliefs following unexpected moves cannot be elicited
by standard means from ex-ante betting preferences. This paper proposes a novel choice criterion,
the "sequential preferences" model. A strategy that is maximal with respect to a player's
sequential preferences is sequentially rational. Furthermore, sequential preferences can be
elicited respecting incentive compatibility, using a variant of the strategy method of Selten
(1967). Thus, sequential preferences provide a revealed-preference rationale for sequential
rationality.
3:15 pm – 4:00 pm, Jian Li, McGill University
“Blackwell’s Informativeness Ranking with Uncertainty Averse Preferences” (with Junjie Zhou)
Abstract:
Blackwell (1951, 1953) proposes an informativeness ranking of experiments: Experiment I is
more Blackwell-informative than Experiment II if and only if the value of experiment I is higher
than that of experiment II for all expected-utility maximizers. Under commitment and reduction,
our main theorem shows that Blackwell equivalence holds for all convex and strongly monotone
preferences, i.e., the uncertainty averse preferences (Cerreia-Vioglio et al. 2011b), which nest
most ambiguity averse preferences commonly used in applications as special cases. Furthermore,
we discuss the possibility of extending the equivalence results to the no commitment case for the
maxmin expected utility and variational preferences under certain conditions.
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4:20 pm – 5:05 pm, Adam Wong, Shanghai University of Finance and Economics
“Nonlinear Pricing with Asymmetric Competition” (with Yong Chao and Guofu Tan)
Abstract:
This paper provides an alternative explanation for the prevalence of nonlinear pricing
mechanisms (e.g., various conditional rebates) in intermediate goods markets. We study a
three-stage game with complete information in which a dominant firm offers a nonlinear tariff
first and then a small rival firm offers a unit price, followed by a representative buyer making her
purchase decision. We apply mechanism design techniques to characterize subgame perfect
equilibria of the game and study the implications of the equilibria. The main messages of our
analysis are that nonlinear pricing can arise in the presence of competition but in absence of
private information, and that a dominant firm can use nonlinear pricing to restrict its rival’s
choices and profits and reduce the buyer surplus and possibly efficiency. Antitrust implications
of our findings are further discussed.
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List of Speakers:
Pak-Hung Au (Nanyang Technological U)
Yeon-Koo Che (Columbia)
Yuxin Chen (NYU Shanghai)
Hulya Eraslan (Rice )
Sambuddha Ghosh (SUFE)
Atsushi Kajii (Kyoto)
Fei Li (UNC)
Jian Li (McGill)
Jingfeng Lu (NUS)
Alessandro Pavan (Northwestern)
Marciano Siniscalchi (Northwestern)
Adam Wong (SUFE)
Jun Yu (SUFE)
Junjie Zhou (SUFE)
List of Participants:
Jimmy Chan (Fudan U)
Bo Chen (Southern Methodist U)
Yajing Chen (ECUST)
Cuihong Fan (SUFE)
Xiaojuan Hu (SUFE)
Qian Jiao (Sun Yat-Sen U)
Melody (Pei-yu) Lo (SUFE)
Dawen Meng (SUFE)
Bin Miao (SUFE)
Kang Rong (SUFE)
Jianfei Shen (Shandong U)
Ning Sun (SUFE)
Qianfeng Tang (SUFE)
Guoqiang Tian (TAMU and SUFE)
Zhewei Wang (Shandong U)
Haibo Xu (Fudan U)
Xiaoshu Xu (Shanghai Jiaotong U)
Wenzhang Zhang (SUFE)
Yongchao Zhang (SUFE)
Xin Zhao (Toronto)
Bingyong Zheng (SUFE)