1. Transfer of Authority within Hierarchies

2017, Review of Economic Design, Vol. 21, 273-290

This paper studies delegation and communication in a model of three-tier hierarchy. There is an uninformed principal, and uninformed intermediary, and an informed agent. Under delegation the principal chooses an interval of actions to delegate to the intermediary, and the intermediary chooses a sub-interval from that interval to delegate to the agent. Under communication, the agent communicates with the intermediary, after which the intermediary communicates with the principal. We characterize the equilibrium outcomes under delegation and communication. We show that under delegation the principal can appoint a more biased individual to be the intermediary, and a less biased individual to be the agent. Furthermore, we demonstrate that the principal can prefer to communicate with the subordinates rather than delegate decision rights to them if the intermediary and the agent have opposing biased.

2. Favor Transmission under Social Image Concerns: An Experimental Study  (joint with Juanjuan MENG)
2016, Journal of Behavioral and Experimental Economics, Vol. 63, 14-21

This paper investigates how social image concern affects favor transmission in one-shot interactions. We conduct a laboratory experiment in which a provider gives a favor to a recipient, who can then only return the favor to an anonymous third party beneficiary. We find that when the recipient's behavior is observable by the provider – e.g., there exists social image concern – the recipient's repayment increases by 25%. To investigate the possible channels of the effect, in our design the provider has the option to send a costly request to the recipient, asking for a favorable treatment of the beneficiary, in addition to varying degrees of social connection between the provider and the beneficiary. We show that the increase in repayment under social image concern is largely attributable to the recipient's increasing desire to meet the provider's request. On the other hand, the providers are more likely to send the request when they can observe the repayment. These results suggest that the concern for social image not only affects the amount of favor transmitted, but also has interesting and important interactions with other underlying motives.

3. Fresh Cadres, Fresh Air? Personnel Control, Institutions, and China's Water Pollution (joint with Nan GAO)

2016, Review of Development Economics, Vol.20, 48-61

Weak law enforcement is usually blamed for the dramatically deterioration of environment in China. Using a panel data covering 287 Chinese prefecture-cities during 2004-2011, we investigate the role of local officials turnover and institutions in improving law enforcement and mitigating water pollutions. We show that water pollution deteriorates with the tenure of incumbent mayors, mayors’ turnover and institutional quality, e.g., executive constraints, are associated with lower pollution, and personnel turnover and institutions complement with each other in mitigating pollution. We also suggest some channels through which personnel turnover affects water pollution: personnel turnover undermines collusion between local officials and polluted firms, stimulates subordinates to exert more efforts to implement environmental policies, and might cause policy discontinuities. In general, we illustrate that cadre’s turnover has only limited and temporary effects in law-enforcement.

4. Social Interactions, Internet Access, and Stock Market Participation: An Empirical Study in China (joint with Shiqi GUO)

2015, Journal of Comparative Economics, Vol. 43, 883-901

Social interaction plays an important role in transmitting relevant information to potential investors. However, the informational role of social interaction might be affected by other information channels, which is to a large extent ignored in previous studies. Using a new household finance survey data covering more than 8,000 Chinese households, we investigate the role of social interaction in individual stock market participation decisions. We find that a better access to Internet and high degree of social interaction both increase stock market participation, but they substitute for each other. In particular, for households with the access to Internet, having the degree of social interaction above the median level in effect is associated with a 6 percentage points decrease in the probability to participate stock market. This finding supports the informational effect of social interaction. Moreover, we also identify a social multiplier effect of social interaction: sociable households living in the communities with higher stock market participation are more likely to invest in stocks. 

5. Optimal Delegation via a Strategic Intermediary

2013, Games and Economic Behavior, Vol. 82, 15-30.

I study the optimal design of delegation rule when a principal has to delegate to an informed agent via a strategic intermediary. I show that when the subordinates have opposing biases, the optimal delegation set will involve a "hole": some modest options are precluded. This may shed some new lights on policy threshold effects: small changes in the underlying state cause large policy responses.

Exit and Voice: A Game-Theoretic Analysis of Customer Complaint Management

2013, Pacific Economic Review, Vol. 18, 177-207.

This work uses mechanism design theory to investigate business management problem. Motivated by the evidences from marketing research, using a multiagent-principal communication game model with voluntary participation constraint, I analyze how to design a mechanism that elicits and aggregates information from informed, strategic consumers, and retains customer base. The model predicts low complaint/dissatisfaction ratio, costly complaint, weak relationship between complaints and objective failure, and a variety of complaint management strategies, which are largely in line with the empirical findings.

7. A Game of Thrones: Power Structure and the Stability of Regimes (with Ruixue JIA), 2014, in Karl Warneryd (Eds) The Economics of Conflict: Theory and Empirical Evidence:: Cambridge: MIT Press, pp. 79-103.

8. Decentrlization and Military Coups (with Ruixue JIA), 2012, in Chen Bo, Manas Chatterji, Hou Na (Eds.) Contributions to Conflict Management, Peace Economics and Development: Cooperation for a Peaceful and Sustainable World, Part 1:: Vol. 20:: London: Emerald Publisher, pp 149-170.

Working Papers

Power Struggle and Pork-Barrel Politics with Chinese Characteristics
(joint with Nan GAO, Lixin Colin XU)

This paper argues that under weak executive constraints, the need to preserve power balance among elites might cause inefficient targeted redistribution towards bureaucratic interest groups. We develop a simple model to study the role of political power/influence in the bargaining among leading local politicians in a one-party regime, and use this to explain the rapid growing sub-national government staff in China, in spite of the repeated streamlining programmes initiated by the central government. By employing a provincial-level panel data in China during 1992-2001, we show that the sub-national government headed by a political weaker party secretary is significantly associated with the increasing number of senior cadres, as well as larger public employment. However, the secretary’s personal influence defined as the political connections with the central government, significantly mitigates the effect of his weakness. Further, larger personal influence is not associated with more fiscal transfer from the center or better career prospect for local politicians, indicating that power/influence serves as “stick” to discipline the colleagues, instead of “carrot” in decision-making process. These results are robust against a variety of specifications and estimation strategies. We also show that the local government might overcome the financial constraint on staff expansion by selling more land.

Pay it Forward: An Experimental Study on Social Connections and Indirect Reciprocity (joint with Juanjuan MENG), Under Review.

Indirect reciprocity refers to the behavior in which, upon receiving a transfer from a donor, the recipient is willing to repay a third party beneficiary in a one-shot interaction. Our lab experiment shows that the recipients’ repayment to the beneficiaries increased significantly when beneficiaries and donors had prior social connections, especially when the donor was generous initially. This effect is not from social connections implicitly revealing donors’ expectations, as a structured message from the donors asking for favorable treatment of the beneficiaries did not affect the recipients’ transfers. Altruism with an endogenous reference group is the promising theory to explain the role of social connections.  

Government Structure and Military Coups (joint with Ruixue JIA)

Persistent Mistrust towards Intellectuals among the Old-Three-Generations: A Legacy of the Cultural Revolution (joint with Jiajia LI)







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