Theme of Workshop：The Role of Information in Shaping Market Interactions
Session Chair：Zenan Wu, Associate Professor, Peking University University
♦ SPEECH1：Relational Insurance Contracts in the Digital Economy
Zhuoran Lu
Assistant Professor
luzhuoran@fudan.edu.cn
Fudan University
Zhuoran Lu is an assistant professor at Fudan University School of Management. He received a PhD in Economics from UCLA and a BA in Economics from Tsinghua University. He is a microeconomic theorist, with interests in contract theory, information economics, network economics, and industrial organization. His recent research studies the optimal pricing strategy for signaling goods, team incentive design under network-based peer monitoring, the optimal selling and innovation strategies for smart products, and relational contracts in the digital economy. His research projects are funded by the National Natural Science Foundation of China.
Abstract: Motivated by the rapid development of usage-based insurance (UBI), we study relational contracts under moral hazard in a competitive insurance market. The insurer can employ both an objective and a subjective signal about the insured’s behavior as, respectively, the explicit and implicit incentive components of the contract. We show that the implicit incentive component may not be used even if it is enforceable when the subjective signal is relatively noisy. We also show that the objective and subjective signals can be both substitutes and complements. Whereas a more accurate subjective signal can always improve the insurance market efficiency, the welfare implication of the objective signal accuracy can be non-monotonic. In particular, if a more accurate objective signal leads to a sufficiently attractive fallback of relational contract, it may reduce the efficiency of the relational contract, or even make all relational contracts infeasible. Our results thus suggest that the regulation of UBI markets that reinforce the enforceability of subjective signal can mitigate the distortions in the design of UBI contracts and the ex-ante investment in related monitoring technologies.
♦ SPEECH2：On the core of markets with co-ownerships and indivisibilities
Xiang Sun
Professor
xiangsun.econ@gmail.com
Wuhan University
Abstract：Following Balbuzanov and Kotowski (2019), we study the exchange of indivisible objects among agents with unit demand, where initially each object is either privately owned or is co-owned by multiple agents. We propose a new notion of core called the effective core for these problems to address the inadequacies of conventional notions of core. We say that a coalition effectively blocks an assignment if it weakly blocks it– as in the definition of the strong core–and the blocking is credible in the sense that no agent in the coalition takes any redundant object owned by a self-feasible subcoalition. We show that the effective core is a nonempty subset of the weak core and a superset of the strong core, and all assignments in it are Pareto efficient. We also propose an algorithm to find assignments in the effective core. Lastly, we make a detailed comparison between the effective core and Balbuzanov and Kotowski’s exclusion core.
♦ SPEECH3：Network Intervention with Asymmetric Information
Zenan Wu
Associate Professor
zenan@pku.edu.cn
Peking University
Abstract：Two potentially asymmetric players compete for a prize of common value, which is initially unknown, by exerting efforts. A designer has two instruments for contest design. First, she decides whether and how to disclose an informative signal of the prize value to players. Second, she sets the scoring rule of the contest, which varies the relative competitiveness of the players. We show that the optimum depends on the designer’s objective. A bilateral symmetric contest—in which information is symmetrically distributed and the scoring bias is set to offset the initial asymmetry between players—always maximizes the expected total effort. However, the optimal contest may deliberately create bilateral asymmetry—which discloses the signal privately to one player, while favoring the other in terms of the scoring rule—when the designer is concerned about the expected winner’s effort. The two instruments thus exhibit complementarity, in that the optimum can be made asymmetric in both dimensions even if the players are ex ante symmetric. Our results are qualitatively robust to (i) affiliated signals and (ii) endogenous information structure. We show that information favoritism can play a useful role in addressing affirmative action objectives.