I am currently an assistant professor of Webank Institution of Fintech & Shenzhen Audencia Business School, Shenzhen University. My research interests remain in the areas of Applied Economic Theory, Search Theory and Industrial Organization. Before joining SZU, I worked at HKU and earned my Ph.D. in economics at UCLA.
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Journal of Economic Behavior & Organization, Vol 164, August 2019, p31-62. [PDF]
We develop a search/matching model in the marriage market with heterogeneous men (a continuum of types) and heterogeneous women (a finite number of types). The model has two distinguishing features. First, men and women are also horizontally differentiated. Second, the search is targeted: each type of woman constitutes a distinctive submarket, and men are able to choose beforehand in which submarkets to participate, but the search is random within each submarket. We show that there is always a unique equilibrium in which men are endogenously segmented into different submarkets, and that the equilibrium matching pattern is weakly positive assortative. We then explore how the equilibrium marriage pattern changes horizontally and vertically as some exogenous shocks occur. In particular, we show that an Internet-induced increase in search efficiency would make the marriage pattern overall more assortative, while an increase in the dispersion of the horizontal match fitness could make the marriage pattern overall less assortative.
Review of Economic Dynamics, Vol 39, January 2021, p220-257 [PDF] [Online Appendix]
In an OTC market where dealers' inventory capacities differ, dealers trade among themselves to rebalance inventories for facilitating the sale and purchase of the asset to and from their investor clients. In a market where the asset is sold quickly, the small-capacity dealers sell to the large-capacity dealers to help them replenish their inventories. Conversely, in a slow market where it takes a relatively long time for the asset to be sold, the small-capacity dealers buy from the large-capacity dealers to help them free up inventory capacities. The prediction, though counterintuitive, is supported by some available empirical evidence.
Forthcoming at Canadian Journal of Economics [PDF]
Market participants can invest to increase their gains from trade before searching for partners. The entrants' type distribution and trade efficiency are jointly determined and correlated. This paper explores a random search model of ex ante investments and trade efficiency, assuming that the investment amount remains the investor's private information. We show that the ex ante payoffs are equivalent to the equilibrium payoffs when investments are observable. In the unique steady state equilibrium, non-degenerate investment distribution and price distribution emerge simultaneously with ex-ante identical agents. In the basic model, where investing agents have no bargaining power, the extra investments fail to improve social welfare even when the search friction vanishes and the investments become efficient due to the mismatches caused by unobservability. Allocating positive bargaining power to investors alleviates the mismatch problem and improves social welfare.
Modern societies thrive on the advices of experts in a garden variety of areas. How do we identify these experts? In circumstances where an expert’s track record cannot be easily assessed by the general public, our society relies on peer reviews from “known” experts to identify new experts. This gives rise to an aristocratic expert class that is inevitably conservative. Young scholars, in order to earn the approval of old “known” experts, have incentives to study old subjects or follow old schools of thought at the expenses of new subjects and new schools of thought that would have better served a changing society. Our society tradeoffs conservatism against competence in its endeavor to identify experts, but the optimal tradeoff may not be achieved due to time-inconsistency. We formalize this problem with a model described in terms of legal experts such as lawyers and judges, and use it to shed light on noise voters and anti-intellectualism in the Trumpian era.
We introduce private information and divorce in a standard search and matching model of marriage without transfers. Forming a marriage allows agents to find out about each other's types, and then decide whether to incur the cost of divorce and re-enter the market or to save the divorce cost and remain in the marriage for the lifetime. We show that informative pre-marriage cheap talk communication (dating) can decrease marriage rate and at the same time increase the divorce rate. This is because the parties can partially reveal private information about each other through communication, which makes them more selective in their marriage decision. At the same time communication improves the future prospects after divorce, which makes the parties more willing to end less desirable marriages. In the main model with two types, when both a steady state equilibrium with dating and divorce and a babbling equilibrium with no divorce exist, the high type is better off with dating and divorce and the low type is worse off. Both the coexistence of the two steady states and the welfare comparison extend to a model with a continuum of types on both sides of the market.
We study a dynamic model of price competition with differentiated products in which new generations of consumers acquire information about available products from their friends of previous generations. The social network, which links consumers across generations, affects the evolution of consumers' awareness of products and firms' long-term (steady-state) market shares. Focusing on steady-state equilibria, we examine how the structure of the social network - including connectivity and homophily - influences market shares, pricing, and welfare.
When there is complementarity in production, will decentralized trading with incomplete information become efficient as search frictions vanish? We consider a dynamic market where heterogeneous buyers and sellers are randomly paired, with match values being supermodular in both types and production costs depending on seller's type. Within each match, the seller makes a take-it-or-leave-it offer without observing the buyer's type. We first highlight how different sellers trade off between price and selling probability differently under extremely large search frictions. Consequently, supermodularity is not necessary (not sufficient) for positive assortative matching (PAM) if the production cost increases fast (slowly) in sellers' type. When search frictions vanish, supermodularity reemerges as the condition for PAM, as sellers' incentive to secure trade in any given period grows inconsequential and the sorting becomes perfect as a result of private information. We demonstrate that the steady state equilibria exist and converge to Walrasian as search frictions vanish.
This paper studies a dynamic non-linear pricing problem, adding the possibility that the seller can costly renege on the initial contracts, which is common in reality in the forms of false advertising, add-on pricing and bait-and-switch. While reneging allows the seller to earn more surplus by offering a new extraction contract after learning the buyer’s preference, a forward looking buyer will hide information. We fully characterize the equilibrium selling mechanism with the presence of this strategic interaction and show that the quality distortion may be mitigated and participation can be higher when the market moves from full-commitment to one with modest reneging cost. In addition, we show that pooling mechanism can be also optimal since the seller can forgone learning opportunity in order to commit. We establish the precise condition under which the welfare improvement happens and further relate it to whether the market is niche or mass. By explicitly modeling seller’s information extraction problem without full commitment, our results have policy implications on protecting consumers from deceptive business tactics.
Work in Progress
Long-Term Competition for Product Awareness with Learning from Friends (with Huanxing Yang)
Patents and Allocation of Resources over Innovation Projects
Econ 2101/2210, "Intermediate Microeconomics", for undergraduate students, HKU
Econ 1001/1210, "Introductory Microeconomics", for undergraduate students, HKU
Econ 6002, "Selected Topics in Microeconomics", for PhD students, HKU