My name is Kun Zhang, and I am a Ph.D. candidate in Economics at W.P.Carey School of Business, Arizona State University.
My research focuses on information economics (especially mechanism design, communication games, information design, and information acquisition) and its applications to industrial organization, contract theory, and financial economics.
Uncharted Waters: Selling a New Product Robustly, 2022
Information DesignIO PDFAbstract: A seller introduces a novel product to an unfamiliar market. The seller sets a price and chooses how much information to disclose about the product to a representative buyer, who may incur a search cost to discover an outside option. The buyer knows her outside option distribution, but the seller knows only its mean and an upper bound on its support, and evaluates any selling strategy by its guaranteed profit. The robustly optimal strategy balances the trade-off between demand and extraction: information design can boost demand by deterring the buyer's search, but this requires providing her with a high payoff via a low price. I find that full disclosure is optimal only when the search cost is high, and different kinds of partial disclosure policies are optimal for lower search costs. Perhaps surprisingly, the price is not monotone in the search cost. These results shed light on the large variations in information disclosure policies among new products, and suggest that improvements in information technology that reduce search costs may increase prices and make information provision noisier.
Costly Evidence and Discretionary Disclosure (with Mark Whitmeyer), 2022
Communication GamesInformation Acquisition PDF SupplementAbstract: A sender flexibly acquires evidence--which she may pay a third party to certify--to disclose to a receiver. When evidence acquisition is overt, the receiver observes the evidence gathering process irrespective of whether its outcome is certified. When acquisition is covert, the receiver does not. In contrast to the case with exogenous evidence, the receiver prefers a strictly positive certification cost. As acquisition costs vanish, equilibria converge to the Pareto-worst free-learning equilibrium. The receiver always prefers covert to overt evidence acquisition.
Withholding Verifiable Information, 2022
Communication GamesInformation Design PDF SupplementAbstract: I study a class of verifiable disclosure games where the sender's payoff is state independent and the receiver's optimal action only depends on the expected state. In such games, what is the sender's preferred equilibrium? When does the sender gain nothing from having commitment power? I identify conditions for an information design outcome to be an equilibrium outcome of the verifiable disclosure game, and give simple sufficient conditions under which the sender does not benefit from commitment power. These results help me to characterize the sender's preferred equilibria and her equilibrium payoff set in a class of verifiable disclosure games. I apply these insights to study influencing voters and selling with quality disclosure.
Buying Opinions (with Mark Whitmeyer), 2022
Moral HazardInformation Acquisition PDF Supplement SlidesAbstract: A principal hires an agent to acquire soft information about an unknown state. Even though neither how the agent learns (the experiment chosen by the agent) nor what the agent discovers (the realization of the experiment) are contractible, the principal is nevertheless unconstrained as to what information the agent can be induced to acquire and report honestly. When the agent is risk neutral, and a) is not asked to learn too much, b) can acquire information sufficiently cheaply, or c) can face sufficiently large penalties, the principal can attain the first-best outcome. Risk aversion (by the agent) introduces inefficiencies: the first-best is unattainable, though whether the agent obtains rents depends on whether he may exit to take his outside option after learning.
Optimal Procurement Design: A Reduced Form Approach, 2021
Mechanism DesignIO PDFAbstract: Standard procurement models make the implicit assumption that the buyer knows the quality of the object at the time she procures, but in many cases, the quality is learned long after the procurement. I study procurement settings where the buyer's valuation of the good supplied depends directly on its quality, and the quality is both unverifiable and unobservable to the buyer. For a wide class of procurement problems, I identify the procurement mechanisms that maximize the buyer's expected payoff and the expected social surplus, respectively. In both cases, the optimal mechanism can be implemented by a dynamic combination of the two commonly used procurement methods: auction and negotiation. Procurement mechanisms of this kind are used in the Italian public procurement system.
Work in progress
Oligopolistic Markets for Information (with Hector Chade)
Mechanism DesignInformation Design Abstract: Available soon.