Business Decisions and Analytics (BDA)

 

Brown Bag Seminar

 

  • Speaker: Zhenyu Hu (National University of Singapore)
  • Title: Information Design of a Delegated Search
  • Date & Time: Nov. 8, Friday, 15:00
  • Location: HS 7, OMP-1
  • Abstract: A principal delegates a sequential search in finite horizon to an agent, who bears the search cost and controls when to terminate the search. Upon termination, the search payoff is split between the principal and agent. However, only the principal can evaluate each search outcome, whose value is thus unobservable to the agent. Leveraging this informational advantage, the principal designs an information policy to strategically provide the agent with some information about the search results over time. We obtain a complete analytical characterization of the principal’s optimal policy, which is fully prescribed by a sequence of deterministic acceptance standards, one for each period. The agent is recommended and voluntarily willing to continue the search if and only if the current termination payoff fails to meet that period’s standard. In particular, the principal gradually lowers the standard over time. When the search results are recallable, the optimal policy provides no information and the agent keeps searching up to a cutoff period, after which the acceptance standard in each subsequent period is determined independently of other periods by equating the agent’s search cost with his marginal return from an additional search in that period. When the search results are not recallable, the acceptance standards are informative and determined recursively across different periods as the optimal stopping thresholds that the principal would employ should she conduct each search by herself at a shadow cost. The shadow cost signifies how difficult it is for the principal to persuade the agent to conduct the search.
  • Speaker short bio: Zhenyu Hu is a Dean’s Chair Associate Professor at the Department of Analytics & Operations at the National University of Singapore. He obtained his PhD in industrial engineering from the University of Illinois at Urbana-Champaign and a bachelor in mathematics from Sun Yat-sen University. His research focuses on dynamic pricing and revenue management, supply chain management, and mechanism and information design. He currently serves as an associate editor for M&SOM.  

 

  • Speaker: Christopher Stapenhurst (Budapest University of Technology and Economics)
  • Title: Deterring Bribery with Scotch Hold’em Poker
  • Date & Time: Oct. 25, Friday, 15:00
  • Location: HS 7, OMP-1
  • Abstract: Corruption requires a coalition to form and reach an agreement. Is there a cheap way to stop any agreement from being reached? We find an optimal mechanism that resembles Poker. The players’ hands are synthetic asymmetric information, and they create a lemons problem in the market for bribes. Our Poker mechanism is robust: it thwarts bribes regardless of the negotiation procedure, including alternating offers bargaining, Dutch auctions, arbitration, and so on. Our mechanism’s cost is inversely proportional to the number of players. So when we embed our mechanism in regulatory approval and regulatory compliance settings, we find that it is optimal to hire competing auditors to each case. And in compliance cases, there is a trade-off between rewarding the agent for honesty and punishing the agent for non-compliance. This trade-off is resolved by rigging the Poker hand distribution against the agent.