Research

We study a dynamic relationship in which a long-lived principal delegates experimentation to short-lived agents, each living for one period. Therefore, the principal has more incentives to experiment than agents. We model this as a contextual bandit problem, where the experimentation yields success that follows a state-dependent Poisson process. The state is drawn independently at the beginning of each period, and a new agent arrives each period with private knowledge about the state. The success rate is unknown to the principal and all agents in one of the states, and it can either be high or low. Players will learn it through experimentation. We focus specifically on stopping-time policies. Due to state transitions, we show that experimentation tends to follow a cyclical pattern—experiencing phases of interest, abandonment, and revival. Meanwhile, the conflict of interest leads to both over- and under-experimentation.

We analyze a misinformation problem involving multiple speakers and listeners. Speakers benefit if listeners read their claims, and listeners benefit when they receive accurate information. Speakers can lie and attract listeners through advertisements with costs. The first welfare theorem does not apply in our setting. We define a new equilibrium concept, stable competitive equilibrium, based on the matching theory and prove that such an equilibrium always exists in the Coasian market, where speakers are required to warrant their claims. Additionally, we compare the Coasian market with the Lemons market and the Pigouvian market, highlighting its advantages. Finally, we apply our findings to examples in advertising and voting.

Endogenous Network and Group Design