The Politics of Attention (with Lin Hu)

(New version coming soon)

We develop an equilibrium theory of attention and politics. In a spatial model of electoral competition where candidates have varying policy preferences, we examine what kinds of candidate behaviors capture voters' limited attention and how this concern affects the overall political outcomes. Following the seminal work of Downs (1957) and Sims (1998), we assume that voters are rationally inattentive and can process the information about policies at a cost proportional to entropy reduction. The main finding is an equilibrium phenomenon called attention- and media-extremism, namely as we increase the attention cost or garble the media technology, a truncated set of the equilibria arouses and attracts voters' attention through enlarging the policy differentials between the varying types of the candidates. We supplement our analysis with historical evidence, and discuss its relevance in the new era featured with greater media choices and distractions, as well as the rise of partisan media and fake news. 

Fake News, Doubts and Political Accountability (with Davin Raiha and Ken Shotts)

(New version coming soon)

Social media has proliferated throughout the developed world. Blogs, tweets, and posts have become important sources of political news and information for many. But what is the impact of the emergence of social media on politics and political behavior? Does it improve or compromise political accountability? This paper explores how social media affects political accountability in ways that are different from conventional media. Compared to conventional media, social media enables dissenting viewpoints, harsh criticisms, and even fake news to emerge, creating doubts about politicians that can lead to detrimental behaviors on the parts of citizens and politicians. We show how doubts can reduce politicians' incentives to exert policy efforts, cause distractions and encourage cosmetic behaviors. We show how it can reduce the ability of citizens to hold politicians accountable, adversely affect the competence of the candidate pool and generate positive path dependence in the evolution of the state of affairs.

Optimal Incentive Contract with Endogenous Monitoring Technology (with Ming Yang)

Recent technology advances have given firms more flexibility to process and analyze sophisticated employee performance data at a reduced and yet significant cost. We develop a theory of optimal incentive contracting where the monitoring technology that governs the above described procedure is part of the designer's strategic planning. In otherwise standard principal-agent models with moral hazard, we allow the principal to partition agents' raw performance data into any finite categories and to pay for the amount of the information that the output signal carries. Through analysis of the trade-off between giving incentives to agents and saving the cost of data utilization, we obtain characterizations of optimal monitoring technologies such as information aggregation, strict MLRP, likelihood ratio-convex performance classification, group evaluation in response to high monitoring cost, and assessing various task performances according to agents' endogenous tendencies to shirk. We examine the implications of these results for workforce management and firms' internal organizations. 

Intermediated Implementation (with Yiqing Xing)

Many real-world problems such as sales and healthcare regulation involve a principal, multiple intermediaries, and agents with hidden characteristics. In these problems, intermediaries compete through offering menus of multifaceted consumption bundles to agents, whereas the principal is limited to regulating sub-aspects of the sold bundles by legal, informational and administrative barriers. We study how the principal can implement through intermediaries any social choice rule that is incentive compatible and individually rational for agents. When intermediaries have private values, intermediated implementation can be achieved by a per-unit fee schedule that allows intermediaries to break even under the target social choice rule. When intermediaries have interdependent values, per-unit fee schedules cannot generally be used to achieve implementation, whereas regulating the distribution over sub-aspects can under general conditions about the target allocation. 

Online Appendix

Efficiency in Dynamic Agency Models

We examine a dynamic agency model where the agent's hidden action can affect current and future signals. We show that when players interact for a large number of instances, asymptotic efficiency can be attained if the monitoring technologies satisfies two general conditions called measure concentration and informativeness, and if the agent can be penalized by reductions in the instantaneous consumption or the future payoff. We use this result to establish a Folk Theorem for discrete-time agency models with high discount factors, and to identify signal processes that yield asymptotic efficiency in discretized continuous-time models. 

Robust Incentive Contract with Disagreement

We examine a dynamic agency model where the agent can disagree over the performance evaluations assigned by the principal and create frictions if the actual incentive pay falls short of what he thinks he deserves. The main result is a characterization of the max-min incentive contract, which gives the principal the best profit guarantee against all disagreement processes. When the horizon is long, the max-min contract is near-efficient and resembles the efficiency wage contract. A key step in the proof is the construction of a simple test contract, which satisfies the above described properties even if disagreements can depend arbitrarily on past efforts and performance measures or exhibit persistence over time.

A Folk Theorem with Virtually Enforceable Actions

This paper proves a Folk Theorem for infinitely repeated private monitoring games with virtually enforceable actions. In these monitoring situations with scarce signals, players depart from the efficient outcome occasionally to acquire the information that detects the profitable deviations of their opponents. In a finite horizon setting with monetary transfers and public communication, I devise a novel Budget Mechanism with Cross-Checking (BMCC) which---through linking the players' action choices over time---virtually implements the efficient outcome at a vanishing incentive cost as the horizon grows and the players become patient. As the building block of my equilibrium construction for the infinitely repeated game, BMCC outperforms public-strategy mechanisms in scarce signal environments and carries important policy applications for labor contract design with costly subjective performance evaluation.

Work In Progress

The Politics of News Personalization (with Lin Hu and Ilya Segal)