School of Business and Management Department of Economics 198 Department of Economics Design of Random Position Auction with Consumer Search Supervisor: AU Pak Hung / ECON Student: LI Ziyuan / ECOF Course: UROP 3100, Fall We investigate the incentives of a monopoly platform to provide consumers with imperfect information service about relevant stores in the context of endogenized per-click fees. The platform commits to a position auction which determines the winner’s per-click fee and the display order of the stores based on which the consumers conduct their sequential search. We identify conditions under which the platform has incentives to adopt a randomized auction in which the winner is assigned the prominent position with probability less than one. Despite discouraging stores to bid high, the introduction of distortion in the position auction can potentially help improve consumers’ search efficiency and hence expand consumers’ participation. The incentives to distort the position auction can be more salient if the consumers have lower search capacity. Design of Random Position Auction with Consumer Search Supervisor: AU Pak Hung / ECON Student: LI Ziyuan / ECOF TAO Junheng / MAEC Course: UROP 4100, Spring UROP 2100, Spring We complement the results from our previous reports with a welfare analysis. We find that when consumers’ favourite store bids highest, total surplus is maximized when the monopoly intermediary does not mismatch the actual seller ranking with the bid ranking in its position auction. This is intuitive because a perfect information service maximizes the value of joining the platform, hence consumer participation and firms’ willingness to bid. When consumers’ least favourite store bids highest, total surplus increases as the intermediary increases the probability at which the seller ranking mismatches with auction results. Here, the platform partially internalizes the negative externality generated by the worst-fit store’s heightened willingness to bid. Hong Kong’s Enforcement Dilemma: A Model of Tunneling Supervisor: HUA Xinyu / ECON Student: ONG Jason Jia Shen / ECON Course: UROP 1000, Summer This paper analyzes the efficacy of common corporate governance mechanisms in explaining and mitigating tunneling activities. By doing so, this study tries to develop a simple theoretical model of tunneling. Specifically, the benchmark model focuses on legal penalties as external mechanisms and subsequently extends to focus on private contracts and the approval process as internal mechanisms. Furthermore, this study also sheds light on the trade-offs faced by each control mechanism in deterring tunneling. The main findings of this study suggest that, under real-world constraints such as limited liability and information asymmetry, effective deterrence requires a combination of both external and internal governance mechanisms.
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