(Journal of Monetary Economics, 2022)
I analyze a dynamic model of concurrent bargaining in which multiple prospective buyers compete to trade with an informed seller. When the seller maintains confidentiality over buyers' past offers, buyers may engage in competitive ``price experimentation'': buyers risk early losses to subsequently acquire informational advantages over competitors and expect to earn future information rents. Due to price experimentation, the seller may benefit from maintaining confidentiality over past offers and restricting buyer entry. The model has implications for the strategic choice between auctions and negotiations, and for the common use of ``pre-qualification'' in asset sales.
Annual Conference of the EALE, Stony Brook International Conference on Game Theory, AEFIN Finance Forum, Barcelona GSE Workshop, CICF, Durham Economic Theory Conference, Econometric Society Meetings, FTG Summer School, Hong Kong Joint Finance Workshop, Stanford SITE - Dynamic Games, Contracts and Markets, World Congress of the Game Theory Society, Western Finance Association (WFA) Meeting, McCombs School of Business, CUHK, and Korea University
We study optimal contracting for innovation projects involving initial exploration followed by exploitation upon success, integrating the experimentation literature with dynamic corporate finance. The shape of the exploitation payoff frontier — not just its level — determines the optimal contract for experimentation and its duration. When the exploitation stage involves moral hazard and limited liability, the principal's continuation profit is inverted U-shaped in the agent's continuation utility. This weakens the principal’s rent-extraction motive and may induce more efficient experimentation, even when the exploitation payoff frontier is always lower. Applications to corporate governance and innovation subsidy design yield sharp policy prescriptions.
Arizona State University, Chung-Ang University, CUHK, Oxford University*, UT Austin, APAD, CAFM, FMA, Econometric Society Australian Meeting, Organizational Economics Asian Conference, Financial Intermediation Research Society, Finance Theory Workshop in Hong Kong, FTG Meetings, SITE - Dynamic Games, Contracts and Market, Relational Contracting Workshop*, World Congress of Econometric Society
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CAFM KDB Best Paper Award
We study a continuous-time model of joint leverage and liquidity management without commitment. Our model highlights how cash reserves shape capital structure policy. Although shareholders typically resist leverage reductions in canonical models (i.e., the ``leverage ratchet effect''), our model predicts leverage adjustments in both directions: (1) cash-rich firms with little debt tend to deleverage while accumulating cash, thereby reducing expected future debt obligations at low opportunity cost; (2) cash-strapped firms issue debt to replenish liquidity, even without corporate tax shields. Our equilibrium characterization yields financial policies, asset prices, return volatilities and credit spreads in closed form.
Cambridge Corporate Finance Theory Symposium (scheduled), FTG Meeting at CMU (scheduled), HKUST-GZ, UT Austin Alumni Conference
“Dynamic Security Design without Commitment” with Vladimir Asriyan, William Fuchs, and Victoria Vanasco
“Dynamic Crisis Management” with Bomi Ahn and Keeyoung Rhee
“Structural Estimation of Exponential Bandit Models” with Yuan Meng and Joonkyo Hong
“Information Design in Dynamic Market for Lemons” with Mark Whitmeyer