Research Projects
Research Projects
Quality and Price in Scoring Auctions (with Yu Awaya and Marton Szabo, Journal of Mathematical Economics)
These days many governments employ scoring auctions---an auction format where bidders submit a pair of price and quality. Its goal is to achieve a high-quality procurement, even at the expense of a higher price. In this paper, we theoretically confirm this trade-off. We compare scoring auctions to more traditional auctions where the auctioneer first chooses a quality optimally, and then bidders submit prices. Our main result identifies conditions for which scoring auctions yield higher quality but at a higher price.
Low Prices and Resale Markets (with Marton Szabo)
We explain the phenomenon of low ticket prices in primary markets when resale markets exist. We compare the primary market price under two different market structures, one with the possibility of resale and one without. The existence of a resale market ensures a higher revenue for the seller since the potential profits from the secondary market attract lower valuation buyers as well. Our main result is that for a class of left-skewed buyer valuation distributions, the seller charges a lower primary market price when resale is possible. This occurs since an increase in the primary market price generally deters more buyers in the resale case compared to the no-resale case. The low primary market price leads to a high chance of resale.
Signaling Weakness through One-time Advantages (with Marton Szabo)
Our paper explains why tactics providing short-term advantages (such as surprise attacks) are usually employed in a war by weaker sides, not by stronger sides. We model the ongoing conflict between states by a multi-stage war of attrition game with private information about military power. The countries can use the short-term advantage once to boost their military power for one period anytime during the conflict. We characterize an equilibrium where the weak type uses this advantage first, while the strong type withholds and only employs it in a later stage if the conflict does not conclude. The weaker type uses this one-time advantage hoping that it will lead to a victory. On the other hand, the strong type forgoes the advantage initially to force a concession and spare the next period's cost of war. One novelty of our model is that, unlike in traditional signaling models, the weak side undertakes an action that signals weakness but can lead to a decisive victory.
Cheap-talk in Crisis Bargaining Games (with Mark Fey and Marton Szabo)
Our paper investigates the role of costless communication (cheap-talk diplomacy) in crisis bargaining games with incomplete information. In these games, countries send cheap-talk messages before the bargaining stage where the failure to reach a settlement leads to war. Ramsay (2011) showed the existence of an influential cheap-talk equilibrium in a Nash-demand game with strategies that do not survive the iterative elimination of weakly dominated strategies (IEWDS). Our paper shows that under the same bargaining structure, a different type of influential cheap-talk still emerges even if we require strategies to survive IEWDS. We also find that the Ramsay (2011) type of influential cheap-talk equilibrium is only possible if an intuitive condition is violated. To compare the effect of bargaining power on the possibility of influential cheap-talk, we also analyze the ultimatum game with two-sided incomplete information and show that with a refinement on off-path beliefs, influential cheap-talk is impossible.
Resource Allocation as an Incentive to Fight (with Marton Szabo)
Allocating a Divisible Good to Agents with Single-Plateau Preferences (with Norikazu Hirose)
Auction Escalation with Loss Aversion