International trade agreements and bargaining

In this dissertation, I provide a compelling explanation about why the World Trade Organization (WTO) permits retaliation only after a lengthy delay. I then explain why it usually rejects requests for retaliation (or a reciprocal withdrawal of concessions) in other related inter- national agreements. Next, I consider a more general problem about agents negotiating over an allocation of some surplus. This multilateral bargaining model could be applied to international trade or many real-world negotiations. I begin by taking a dynamic mechanism design approach and analyze the welfare effects among same-sector retaliation with and without delay as well as cross-sector retaliation with and without delay. I show that a retaliation with delay mechanism generates higher welfare and supports a higher self-enforcing level of cooperation than does a retaliation without delay mechanism. I demonstrate that under certain conditions, a same-sector retaliation mechanism generates higher welfare and supports a higher self-enforcing level of cooperation than does a cross-sector retaliation mechanism. All the above results are showing to hold for several different stochastic process of how a state of the world evolves. I then consider a more general case of bargaining where the size of the surplus is endogenized. In my model of the first two chapters after the introduction, although the size of the surplus varies across time, it still evolves in a stochastic manner. In many real-world negotiations, however, a surplus is usually created by players and each player may have certain power to influence a recognition process. Hence, my main innovation in the last chapter is to allow a surplus as well as recognition probabilities to be endogenously determined by players' actions. I assume that players' actions can have either persistent or transitory effects on a bargaining process. I compare the equilibrium outcomes under different voting rules and show that when a competition becomes less intensive (i.e., a proposal needs the consents of more players), it raises social welfare while it makes a free-ride problem more severe.

International trade agreements and bargaining

In this dissertation, I provide a compelling explanation about why the World Trade Organization (WTO) permits retaliation only after a lengthy delay. I then explain why it usually rejects requests for retaliation (or a reciprocal withdrawal of concessions) in other related inter- national agreements. Next, I consider a more general problem about agents negotiating over an allocation of some surplus. This multilateral bargaining model could be applied to international trade or many real-world negotiations. I begin by taking a dynamic mechanism design approach and analyze the welfare effects among same-sector retaliation with and without delay as well as cross-sector retaliation with and without delay. I show that a retaliation with delay mechanism generates higher welfare and supports a higher self-enforcing level of cooperation than does a retaliation without delay mechanism. I demonstrate that under certain conditions, a same-sector retaliation mechanism generates higher welfare and supports a higher self-enforcing level of cooperation than does a cross-sector retaliation mechanism. All the above results are showing to hold for several different stochastic process of how a state of the world evolves. I then consider a more general case of bargaining where the size of the surplus is endogenized. In my model of the first two chapters after the introduction, although the size of the surplus varies across time, it still evolves in a stochastic manner. In many real-world negotiations, however, a surplus is usually created by players and each player may have certain power to influence a recognition process. Hence, my main innovation in the last chapter is to allow a surplus as well as recognition probabilities to be endogenously determined by players' actions. I assume that players' actions can have either persistent or transitory effects on a bargaining process. I compare the equilibrium outcomes under different voting rules and show that when a competition becomes less intensive (i.e., a proposal needs the consents of more players), it raises social welfare while it makes a free-ride problem more severe.

Delegating learning

Learning is crucial to organizational decision making but often needs to be delegated. We examine a dynamic delegation problem where a principal decides on a project with uncertain profitability. A biased agent, who is initially as uninformed as the principal, privately learns the profitability over time and communicates to the principal. We formulate learning delegation as a dynamic mechanism design problem and characterize the optimal delegation scheme. We show that private learning gives rise to the trade‐off between how much information to acquire and how promptly it is reflected in the decision. We discuss implications on learning delegation for distinct organizations.

Non‐Clairvoyant Dynamic Mechanism Design

We introduce a new family of dynamic mechanisms that restricts sellers from using future distributional knowledge. Since the allocation and pricing of each auction period do not depend on the type distributions of future periods, we call this family of dynamic mechanisms non‐clairvoyant. We develop a framework (bank account mechanisms) for characterizing, designing, and proving lower bounds for dynamic mechanisms (clairvoyant or non‐clairvoyant). We use the same methods to compare the revenue extraction power of clairvoyant and non‐clairvoyant dynamic mechanisms.