Published Papers
- Wing Suen
Rationing and Rent Dissipation in the Presence of Heterogeneous Individuals
Journal of Political Economy
Vol. 97, No. 6, December 1989, 1384-1394
This paper discusses the implications of rationing by waiting when consumers have different time costs and personal valuations. The joint distribution function of time costs and personal valuations is used to characterize market equilibrium. It is argued that, under certain conditions, an increase in the variance of time costs will reduce the dissipation of rent. Furthermore, it is shown that introducing a secondary market for a rationed good does not necessarily improve welfare because total surplus under rationing by waiting depends more on the variance than on the level of time costs and personal valuations. The model is also used to discuss other institutions that involve rent-seeking activities, such as the patent system and import quotas.
- Wing Suen
Statistical Models of Consumer Behavior with Heterogeneous Values and Constraints
Economic Inquiry
Vol. 28, Issue 1, January 1990, 79--98
In a market with heterogeneous individuals, the fact that a particular group of individuals are the consumers of a particular product already indicates that there exist systematic differences between them and the average person. Simple tools from statistical theory are used here to analyze the implications of consumer diversity. It is argued that an increase in consumer diversity will increase the gains from trade, and that there is a “shadow price of heterogeneity” associated with product quality. Throughout the discussion, the significance of consumer self-selection and the distinction between “average” and marginal” will be emphasized.
- Wing Suen The Value of Product Diversity Oxford Economic Papers Vol. 43, No. 2, April 1991, 217-223
- Yoram Barzel and Wing Suen
The Demand Curves for Giffen Goods are Downward Sloping
Economic Journal
Vol. 102, No. 413, July 1992, 896-905
Consumers' optimal consumption strategy in anticipation of price variations is to equalise the marginal utility of income across different price regimes. Since the marginal utility of income is positively related to the price of a Giffen good, consumers will adopt a consumption plan (through saving and borrowing, insurance, or an appropriate choice of portfolio) that allows them to increase total expenditure when the Giffen good is relatively expensive and to reduce total expenditure when the Giffen good is relatively cheap. Giffen goods being inferior goods, this optimal choice of total expenditures will produce an income effect that reinforces the subsitution effect, thus resulting in a downward sloping demand curve.
- Wing Suen A Diagrammatic Proof That Indirect Utility Functions Are Quasi-Convex Journal of Economic Education Vol. 23, No. 1, Winter 1992, 53-55
- Wing Suen Commodity Bundling in the Automobile Market Hong Kong Economic Papers No. 22, 1992, 13-20
- Hon-Kwong Lui and Wing Suen
The Narrowing Gender Gap in Hong Kong: 1976-1986
Asian Economic Journal
Vol. 7, Issue 2, July 1993, 167-180
It is well known that real wages in Hong Kong have been rising continuously in the past few decades. Less widely appreciate is the fact that the earning of women grew faster than the earnings of men. As a result the female-male earnings ratio increased dramatically. Using data collected from the 1976, 1981 and 1986 censuses, we document and analyze the improvement in earnings and occupation achievements of women relative to men. We argue that the female earnings gap may have been reduced by as much as ten percentage points in the ten year period. The rise in education level and in labor force participation of women are the chief factors in their economics progress.
- Pak Hung Mo and Wing Suen
Simple Analytics of Productive Consumption
Journal of Political Economy
Vol. 102, No. 2, April 1994, 372-383
Productive consumption adds to utility and income at the same time. The shadow price of a productive good is equal to its money price less its marginal product. As more of the good is consumed, its shadow price rises because of diminishing productivity, and the consumer's full income also rises because the marginal product is positive. This paper uses a simple method to derive the comparative statics of the demand system when shadow prices and full income are endogenous. The direction of the overall bias induced by endogenous prices and income is found to be determinate. We demonstrate that the demand for productive goods tends to be relatively unresponsive to exogenous changes in prices and income. We also show that labor supply will be relatively unresponsive to wage and unearned income if market work causes fatigue.
- Hon-Kwong Lui and Wing Suen
The Structure of the Female Earnings Gap in Hong Kong
Hong Kong Economic Papers
No. 23, 1994, 15-29
The difference in earnings between the sexes is significant and pervasive in Hong Kong. The 1986 By-Census data reveals that full-time female workers on average earn 34 per cent less than men. Differences in characteristics of the male and female labor force account for about one-fifth of the raw earnings gap. The female earnings gap tends to be relatively large for people in high earnings brackets--a manifestation of the glass ceiling. Human capital theory explains some but not all variations in the earnings gap across socio-economic variables.
- Wing Suen
Market-Procured Housework: The Demand for Domestic Servants and Female Labor Supply
Labour Economics
Vol. 1, No. 3-4, September 1994, 289-302
Domestic servants and a woman's own time are substitutes in the household production process. The demand for servants increases with the woman's market wage, her non-wage income, and the presence of young children in the family. A bivariate probit model using data from Hong Kong suggests that women who participate in the labor force have a .008 higher probability of having servants than women who are not in the labor force. Conversely, women who have servants have a .22 higher probability of labor force participation than woman with no servants. In households that use market-procured domestic help, the presence of young children is found to have no negative effect on female labor force participation.
- Wing Suen
Risk Avoidance under Uncertainty
Journal of Economic Theory
Vol. 65, Issue 2, April 1995, 627-634
When the expected flow returns from an investment is positive, bankruptcy carries a cost in terms of the future profit opportunities forgone. This paper demonstrates that, under limited liability, the one-shot gain from taking risky projects is offset by the long-term loss resulting from a higher probability of bankruptcy. In a multi-period model, the incentive problems associated with limited liability is less severe than what static models would suggest.
- Wing Suen Sectoral Shifts: Impact on Hong Kong Workers Journal of International Trade and Economic Development Vol. 4, No. 2, July 1995, 135-152
- Wing Suen Gender Gap in Hong Kong: An Update Asian Economic Journal Vol. 9, Issue 3, November 1995, 311-319
- Wing Suen
Decomposing Wage Residuals: Unmeasured Skill or Statistical Artifact?
Journal of Labor Economics
Vol. 15, No. 3, July 1997, 555-566
The decomposition of wage residuals into standard deviation and percentile ranks can be misleading because the two measures are not necessarily independent. With rising wage inequality, the mean percentile rank of low‐wage groups will rise simply because more dispersed distributions have thicker tails. This interpretation is consistent with the observed stability of gender and racial wage gaps. In contrast, the unmeasured skill interpretation of wage residuals would predict widening wage gaps in the face of rising wage inequality, unless one posits an increase in the level of unobserved skill for women and blacks.
- Leigh Anderson, Gene Swimmer and Wing Suen
An Empirical Analysis of Viewer Demand for U.S. Programming and the Effect of Canadian Broadcasting Regulations
Journal of Policy Analysis and Management
Vol. 16, No. 4, Autumn 1997, 525-540
Using viewer share and rating points for the Toronto/Hamilton television market, we estimate the demand for U.S. programs retransmitted in Canada and test several hypotheses on the effect of domestic content regulation, program type, simulcasting regulations, network affiliation and other broadcasting variables on audience size. These estimates have general implications for the current trade debate over the cultural industries. More specifically, our results provide support for some U.S. rights holders arguing for greater compensation for the retransmission of programs in Canada, and they raise questions about the publicly stated rationale of domestic content quotas generation net social benefits. These results can generalize to the many European Union and English-speaking countries using similar domestic content quotas.
- Wing Suen
Retirement Patterns in Hong Kong: A Censored Regression Analysis
Journal of Population Economics
Vol. 10, Issue 4, October 1997, 443-461
This paper provides an overview of retirement patterns in Hong Kong on the basis of limited data. A censored regression model is used to infer the retirement age from people's current retirement status and their current age. This model is equivalent to a restricted probit model, and the interpretation of parameters is straightforward. The results clearly show a negative income effect on the retirement decision. The retirement age seems to be positively related to lifetime earnings but negatively related to the rate of decline of earnings with age.
- Hon-Kwong Lui and Wing Suen
Does School Quality Matter? Evidence from the Hong Kong Experience
Asian Economic Journal
Vol. 12, No. 2, June 1998, 153-170
This paper analyses the differential returns to education and to language ability of natives and Chinese immigrants in Hong Kong. The large difference in quality between Hong Kong schools and Chinese schools provides a natural experiment for evaluating the effect of school quality on students' performance in the labor market. We show that the rate of return to schooling is more than three times higher among local-born workers than among Chinese immigrants to Hong Kong. Our analysis also suggests that English language education is one important component of the success of the Hong Kong education system.
- Wing Suen and Hon-Kwong Lui
A Direct Test of the Efficient Marriage Market Hypothesis
Economic Inquiry
Vol. 37, Issue 1, January 1999, 29-46
Becker's (1973) efficient marriage market hypothesis is taken at face value, and it is directly confronted with data from Hong Kong. The theory of optimal assignment is used to develop an empirical model of spouse selection, which resembles a Tobit model. This model can address positive or negative assortative matching as well as marginal product pricing in marriage markets. A computer algorithm is used to solve the assignment problem for imputed marital output. The degree to which the actual pairing of husbands and wives corresponds to the optimal pairing provides a goodness-of-fit test of the efficient marriage market hypothesis.
- Wing Suen
Estimating the Effects of Immigration in One City
Journal of Population Economics
Vol. 13, Issue 1, March 2000, 99-112
This paper presents a new method of estimating the effects of immigration on the labor market that does not require variations in immigration across cities. With a two-stage CES model that aggregates immigrant groups by age cohorts and aggregates cohorts into effective labor, the econometric estimation and the interpretation of parameters are particularly straightforward. The paper uses data from Hong Kong to estimate the elasticities of complementarity associated with increased immigration. A simulation study indicates that a 40% increase in the stock of new immigrants will lower wages by no more than one percent.
- Wing Suen
A Competitive Theory of Equilibrium and Disequilibrium Unraveling in Two-Sided Matching
RAND Journal of Economics
Vol. 31, No. 1, Spring 2000, 101-120
I offer a competitive explanation for the rush toward early contracting in matching markets. The explanation does not rely on market power, strategic motives, or instability of the assignment mechanism. Uncertainty about workers’ ability will produce inefficient matching if contracts are formed early. However, the insurance gain from early contracting may outweigh the loss from inefficient matching. If firms are risk neutral, it is the mediocre firms that will have the greatest incentive to offer early contracts. Opening up a market for early contracting will generally benefit the firms and hurt the workers. If firms are sufficiently risk averse, even the lowest-quality firms may want to offer early contracts, and a competitive equilibrium may not exist.
- Wing Suen
Testing Rent Sharing Using Individualized Measures of Rent: Evidence from Domestic Helpers
Economic Inquiry
Vol. 38, Issue 3, July 2000, 470-486
I offer a competitive explanation for the rush toward early contracting in matching markets. The explanation does not rely on market power, strategic motives, or instability of the assignment mechanism. Uncertainty about workers' ability will produce inefficient matching if contracts are formed early. However, the insurance gain from early contracting may outweigh the loss from inefficient matching. If firms are risk neutral, it is the mediocre firms that will have the greatest incentive to offer early contracts. Opening up a market for early contracting will generally benefit the firms and hurt the workers. If firms are sufficiently risk averse, even the lowest-quality firms may want to offer early contracts, and a competitive equilibrium may not exist.
- Wing Suen, Eugene Silberberg and Paul Tseng
The LeChatelier Principle: The Long and The Short of It
Economic Theory
Vol. 16, No. 2, September 2000, 471-476
Using ordinary calculus techniques, we investigate the conditions under which LeChatelier effects are signable for finite changes in parameter values. We show, for example, that the short run demand for a factor is always less responsive to price changes than the long run demand, provided that the factor of production and the fixed factor do not switch from being substitutes to being complements (or vice versa) over the relevant range of the price change. The absence of a sign change in the complementarity/substitutability relation holds under conditions that are considerably more general than supermodularity of the production function.
- William Chan and Wing Suen
An Evaluation of the Hong Kong Employees Retraining Programme
Asian Economic Journal
Vol. 14, No. 3, September 2000, 255-281
The Employees Retraining Programme, launched by the Hong Kong government in 1993, was promoted as the solution to structural unemployment resulting fromrapid structural transformation of the economy. However, our study of the labourmarket performance of a group of trainees who received training in 1994/5 showsno evidence of any positive effect on the earnings or employment rate of trainees one year after the completion of training in relation to various comparison groups. The apparent lack of success can be traced to low target efficiency and distorted incentives that result in over-utilization of retraining resources.
- Li Hao and Wing Suen
Risk Sharing, Sorting, and Early Contracting
Journal of Political Economy
Vol. 108, No. 5, October 2000, 1058-1091
In an assignment market with uncertainty regarding productive ability of participants, early contracting can occur as participants balance risk sharing and sorting efficiency. More promising agents may contract early with each other because insurance gains outweigh sorting inefficiency, whereas less promising agents wait. It can also happen in equilibrium that more promising job applicants contract early with less promising firms. Such worker-driven equilibria may arise when applicants are more risk-averse, have greater uncertainty regarding their quality, or face a tighter market and when production exhibits increasing returns to firms' qualities. Early contracting then unambiguously hurts the more promising firms that choose to wait.
- Chi Fai Leung and Wing Suen
Some Preliminary Findings on Hong Kong Business Cycles
Pacific Economic Review
Vol. 6, No. 1, February 2001, 37-54
This paper presents some preliminary quantitative findings on the characteristics of business cycles in Hong Kong. The recently developed “approximate bandpass filter” is used to extract the fluctuations at business cycle frequencies (8 to 32 quarters) of macroeconomic time series. Based on the filtered time series, the paper identifies the cyclical turning points, describes the pattern of output fluctuations, and examines the co-movement of various macroeconomic variables.
- Li Hao, Sherwin Rosen and Wing Suen
Conflicts and Common Interests in Committees
American Economic Review
Vol. 91, No. 5, December 2001, 1478-1497
Committees improve decisions by pooling members' independent information, but promote manipulation, obfuscation, and exaggeration of private information when members have conflicting preferences. Committee decision procedures transform continuous data into ordered ranks through voting. This coarsens the transmission of information, but controls strategic manipulations and allows some degree of information sharing. Each member becomes more cautious in casting the crucial vote than when he alone makes the decision based on own information. Increased quality of one member's information results in his casting the crucial vote more often. Committees make better decisions for members than does delegation.
- Wing Suen and Bo-sin Tang
Optimal Site Area for High Density Housing Development
Habitat International
Vol. 26, Issue 4, December 2002, 539-552
This study provides an empirical assessment of the optimal site area for master-planned high-density housing development in Hong Kong. Conventional hedonic pricing methods are not used because they cannot separate the amenity value of large sites from the price effects caused by market power. We obtain our estimate from a unique data set containing the choice of applicants for public housing units in 128 housing estates in Hong Kong between 1990 and 1998. An inverted U-shaped relationship between site area and popularity of the estate is revealed. We conclude that the land areas of most public housing estates in Hong Kong are sub-optimal. Our estimated optimal site area serves as a quantitative benchmark for the government in its future disposal of public as well as private housing land.
- William Chan and Wing Suen
The Long Term Effectiveness of the Hong Kong Employees Retraining Programme
Pacific Economic Review
Vol. 8, No. 1, January 2003, 79-98
The Employees Retraining Programme in Hong Kong was promoted as the solution to structural unemployment resulting from rapid transformation of the economy. However, our study of the labour market performance of a group of trainees shows no evidence of any positive programme effect, more than three years after the completion of training, when compared to a group of job searchers. In particular, full time training is found to be less effective than part time training, and training in general skills is significantly less effective than training in specific occupational skills. This suggests problems in the design and implementation of retraining in Hong Kong.
- Wing Suen, William Chan and Junsen Zhang
Marital Transfers and Intra-Household Allocation: A Nash-Bargaining Analysis
Journal of Economic Behavior and Organization
Vol. 52, Issue 1, September 2003, 133-146
This paper explores the implications of inter-generational marital transfers on the allocation of resources within a conjugal household. Adopting a Nash-bargaining framework with alternative models of the threat points, it is argued that parents have greater incentive to make transfers to a married child than to a single child because of the efficiency gains from joint consumption and production of family public goods and because of the increase in bargaining power of the child in the allocation of private consumption. Such transfers also enhance marital stability by increasing the efficiency gains from marriage.
- Li Hao and Wing Suen
Delegating Decisions to Experts
Journal of Political Economy
Vol. 111, No. S1, February 2004, S311-S335
We present a model of delegation with self‐interested and privately informed experts. A team of experts with extreme but opposite biases is acceptable to a wide range of decision makers with diverse preferences, but the value of expertise from such a team is low. A decision maker wants to appoint experts who are less partisan than he is in order to facilitate information pooling by the expert team. Selective delegation, either by controlling the decision‐making process or by conditioning the delegation decision on his own information, is an effective way for the decision maker to safeguard own interests while making use of expert information.
- Li Hao and Wing Suen
Self-Fulfilling Early-Contracting Rush
International Economic Review
Vol. 45, No. 1, February 2004, 301-324
In markets for entry-level professionals, the insurance motive drives some participants to sign early contracts. The rush to early contracting can be self-fulfilling, as both its effect on expectations about demand-supply balance in the subsequent spot market and the effect on it from changes in the demand-supply balance can be nonmonotone. Matching markets with more risk-averse participants, a greater uncertainty regarding relative supply of positions, or a more polarized distribution of applicant qualities are more vulnerable to self-fulfilling early-contracting rushes. Employers can have a collective interest in preventing early offers to a few promising applicants from starting the rushes.
- Wing Suen
The Self-Perpetuation of Biased Beliefs
Economic Journal
Vol. 114, No. 495, April 2004, 377-396
[Technical Appendix]
To overcome strong prior beliefs, strong evidence to the contrary is needed. If a person is predisposed to choosing a certain action, the advice from an advisor who sets a low threshold for recommending the alternative action is not of much use. The preference for like-minded advisors who supply coarse information implies that the advice a person receives is likely to reinforce his existing priors. This effect can lead to polarisation of opinion and the emergence of self-serving beliefs. The learning process is prolonged and the induced short run bias can become perpetual if information is costly.
- Hon-Kwong Lui and Wing Suen
The Shrinking Earnings Premium for University Graduates in Hong Kong: The Effect of Quantity or Quality?
Contemporary Economic Policy
Vol. 23, Issue 2, April 2005, 242-254
In 1989, the Hong Kong government embarked on a program to increase the provision of first-year first-degree places. The expansion of tertiary education represents a large and exogenous increase in the supply of university graduates to the territory. This article measures the labor market effects of the expansion program by studying the changes in earnings premium for university graduates. Two alternative hypotheses - crowding and quality effects - are identified to explain why the earnings premium shrank. The results support the view that the declining quality of university graduates is the prime candidate for the declining earnings premium.
- Ettore Damiano, Li Hao and Wing Suen
Unravelling of Dynamic Sorting
Review of Economic Studies
Vol. 72, No. 4, October 2005, 1057-1076
We consider a two-sided, finite-horizon search and matching model with heterogeneous types and complementarity between types. The quality of the pool of potential partners deteriorates as agents who have found mutually agreeable matches exit the market. When search is costless and all agents participate in each matching round, the market performs a sorting function in that high types of agents have multiple chances to match with their peers. However, this sorting function is lost if agents incur an arbitrarily small cost in order to participate in each round. With a sufficiently rich type space, the market unravels as almost all agents rush to participate in the first round and match and exit with anyone they meet.
- Douglas Allen, Krishna Pendakur and Wing Suen
No-Fault Divorce and the Compression of Marriage Ages
Economic Inquiry
Vol. 44, Issue 3, July 2006, 547-558
We examine how no-fault divorce law affects the age at first marriage, when everyone has a different value of marriage. The heterogeneity of individual values implies an unambiguous negative effect on the variance of marriage age. We test this hypothesis with marriage records from 1970 to 1995. Controlling for state-level heterogeneity and for time trends, the standard deviation of the log age at first marriage drops by approximately 5% with the introduction of no-fault divorce. We find that the mean age at first marriage increases slightly, suggesting that the mean person is slightly worse off with no-fault divorce.
- William Chan, Li Hao and Wing Suen
A Signaling Theory of Grade Inflation
International Economic Review
Vol. 48, No. 3, August 2007, 1065-1090
When employers cannot tell whether a school truly has many good students or just gives easy grades, a school has incentives to inflate grades to help its mediocre students, despite concerns about preserving the value of good grades for its good students. We construct a signaling model where grades are inflated in equilibrium. The inability to commit to an honest grading policy reduces the efficiency of job assignment and hurts a school. Grade inflation by one school makes it easier for another school to do likewise, thus providing a channel to make grade exaggeration contagious.
- Wing Suen
The Comparative Statics of Differential Rents in Two-Sided Matching Markets
Journal of Economic Inequality
Vol. 5, Issue 2, August 2007, 149-158
This paper studies how shifts in the distribution of quality on one side of the market affect earnings on the other side in a model of one-to-one matching. A more dispersed distribution of quality hurts the low ability agents on the other side because they are matched to inferior partners. Earnings being a differential rent in these markets, this pulls down the earnings of high quality agents as well. It is shown that a more dispersed ability distribution reduces total earnings on the opposite side of the market. Under some conditions, all agents on that side are hurt.
- Hon-Kwong Lui and Wing Suen
Men, Money, and Medals: An Econometric Analysis of the Olympic Games
Pacific Economic Review
Vol. 13, Issue 1, February 2008, 1-16
Population size and the level of income per capita are major determinants of the number of medals won by a country in the 1952-2004 Olympic Games. A parsimonious count (Poisson) model fits the data very well: the squared correlation between the predicted value of the number of medals won and the observed value is about 56%. There exist strong country-specific effects in Olympic medals results. While the USA and China tend to outperform other countries relative to their size and income, the Asian dragons tend to under-perform in the Games.
- Jimmy Chan and Wing Suen
A Spatial Theory of News Consumption and Electoral Competition
Review of Economic Studies
Vol. 75, No. 3, July 2008, 699-728
We characterize the optimal editorial positions of the media in a model in which the media influence both voting behaviour and party policies. Political parties are less likely to choose partisan policies when more voters consume informative news. When there are two media outlets, each should be slightly biased relative to its audience in order to attract voters with relatively extreme views. Voter welfare is typically higher under a duopoly than under a monopoly. Two media outlets under joint ownership may provide more diverse viewpoints than two independent ones, but voter welfare is not always higher.
- William Chan, Wing Suen and Ka Fai Choi
Investing in Reputation: Strategic Choices in Career Building
Journal of Economic Behavior and Organization
Vol. 67, Issues 3-4, September 2008, 844-854
In many occupations, reputation or past performance affects the demand for a worker's output, creating an incentive to invest in reputation early in a career. For high ability workers, the returns to investing in reputation are larger in the mass market, while less able ones would avoid the more competitive mainstream by developing their specializations in the fringe market. Some mainstream workers may enter the fringe market once the motive to invest in reputation diminishes later in their careers, but less able workers who start in the fringe are seldom able to return to the mainstream.
- Ettore Damiano, Li Hao and Wing Suen
Credible Ratings
Theoretical Economics
Vol. 3, September 2008, 325-365
This paper considers a model of a rating agency with multiple clients, in which each client has a separate market that forms a belief about the quality of the client after the agency issues a rating. When the clients are rated separately (individual rating), the credibility of a good rating in an inflationary equilibrium of the signaling game is limited by the incentive of the agency to exaggerate the quality of the client. With a centralized rating, the agency rates all clients together and shares the rating information among all markets. This allows the agency to coordinate the ratings and achieve a higher average level of credibility for its good ratings than with individual rating. Under decentralized rating, the ratings are again shared among all markets, but each client is rated by a self-interested rater of the agency with no access to the quality information of other clients. When the underlying qualities of the clients are correlated, decentralized rating leads to a smaller degree of rating inflation and hence a greater level of credibility than under individual rating. Comparing centralized rating with decentralized rating, we find that centralized rating dominates decentralized rating for the agency when the underlying qualities are weakly correlated, but the reverse holds when the qualities are strongly correlated.
- Li Hao and Wing Suen
Viewpoint: Decision-Making in Committees
Canadian Journal of Economics
Vol. 42, No. 2, May 2009, 359-392
This article reviews recent developments in the theory of committee decision-making. A committee consists of self-interested members who make a public decision by aggregating imperfect information dispersed among them according to a pre-specified decision rule. We focus on costly information acquisition, strategic information aggregation, and rules and processes that enhance the quality of the committee decision. Seeming inefficiencies of the committee decision-making process such as over-cautiousness, voting, and delay emerge as partial remedies to these incentive problems.
- Jimmy Chan and Wing Suen
Media as Watchdogs: The Role of News Media in Electoral Competition
European Economic Review
Vol. 53, Issue 7, October 2009, 799-814
[Web Appendix]
We develop an equilibrium model to analyze the role of the media in electoral competition. When policy payoffs are state-dependent, party policies do not converge to the median voter's ideal policy if the media report only party policies. News analysis about the state, though possibly biased, can discipline off-equilibrium deviations and make the parties adopt more centrist policies. Since voters are rational, the party favored by the media need not win with a higher probability. Instead, media bias may reduce the effectiveness of electoral competition and lead to more polarized policies.
- Wing Suen
Mutual Admiration Clubs
Economic Inquiry
Vol. 48, Issue 1, January 2010, 123-132
This article proposes a theory of group formation based on the motive to seek informed opinion. Because an individual evaluates whether others are informed or not using his own priors, he identifies people with similar beliefs to be more informed than those with different beliefs. The result is an equilibrium in which like-minded individuals self-select into distinct groups, with members of each group believing that their own group is superior.
- Ettore Damiano, Li Hao and Wing Suen
First in Village or Second in Rome?
International Economic Review
Vol. 51, No. 1, February 2010, 263-288
Though individuals prefer high-quality peers, there are advantages to being high up in the pecking order within a group. In this environment, sorting of agents yields an overlapping interval structure in the type space. Segregation and mixing coexist in a stable equilibrium. With transfers, this equilibrium corresponds to a competitive equilibrium where agents bid for relative positions and entails less segregation than the efficient allocation. More egalitarianism within organizations induces greater segregation across organizations, but can improve the allocation efficiency. Since competition is most intense for intermediate talent, effective personnel policies differ systematically between high-quality and low-quality organizations.
- Jun Han and Wing Suen
Age Structure of the Workforce in Growing and Declining Industries
Journal of Population Economics
Vol. 24, No. 1, January 2011, 167-189
Industry-specific human capital reduces the incentive for older workers to leave declining industries and raises the incentive for younger workers to join growing industries. Using the industry restructuring experience of Hong Kong, we find that a 1% increase in employment share of an industry is associated with a 0.60-year decrease in the average age of its workforce. The relationship is more pronounced among less educated workers, who have less general human capital, and male workers, who are more committed to the labor force, than among well educated workers and female workers.
- Hon-Kwong Lui and Wing Suen
The Effects of
Public Housing on Internal Mobility in Hong Kong
Journal of Housing Economics
Vol. 20, Issue 1, March 2011, 15-29
The rationing of public housing reduces the efficiency of the match between public housing units and their occupants, as competing users cannot effectively convey their preferences through a price mechanism. This study investigates the costs of public housing from the perspective of the misallocation of housing units to households and examines how this misallocation affects their lives. We show that public housing occupants are less mobile than private housing occupants, but conditional on moving, they are more likely to relocate farther away from their original place of residence. They are also less likely to work in the same place as they live.
- Ettore Damiano, Li Hao and Wing Suen
Optimal Deadline for Agreements
Theoretical Economics
Vol. 7, May 2012, 357-393
Costly delay in negotiations can induce the negotiating parties to be more forthcoming with their information and improve the quality of the collective decision. Imposing a deadline may result in stalling, in which players at some point stop making concessions but switch back to conceding at the end, or a deadlock, in which concessions end permanently. Extending the deadline hurts the players in the first case, but is beneficial in the second. When the initial conflict between the negotiating parties is intermediate, the optimal deadline is positive and finite, and is characterized by the shortest time that allows efficient information aggregation in equilibrium.
- Ettore Damiano, Li Hao and Wing Suen
Competing for Talents
Journal of Economic Theory
Vol. 147, Issue 6, November 2012, 2190-2219
Two organizations compete for high quality agents from a fixed population of heterogeneous qualities by designing how to distribute their resources among members according to their quality ranking. The peer effect induces both organizations to spend the bulk of their resources on higher ranks in an attempt to attract top talents that benefit the rest of their membership. Equilibrium is asymmetric, with the organization with a lower average quality offering steeper increases in resources per rank. High quality agents are present in both organizations, while low quality agents receive no resources from either organization and are segregated by quality into the two organizations. A stronger peer effect increases the competition for high quality agents, resulting in both organizations concentrating their resources on fewer ranks with steeper increases in resources per rank, and yields a greater equilibrium difference in average quality between the two organizations.
- Heng Chen and Wing Suen
Falling Dominoes: A Theory of Rare Events and Crisis Contagion
American Economic Journal: Microeconomics
Vol. 8, No. 1, February 2016, 228-255
Crises, such as revolutions and currency attacks, rarely occur; but when they do they typically arrive in waves. The rarity of crises itself is an important contagion mechanism in a multiple-country dynamic global game model. When players are uncertain about the true model of the world, observing a rare success elsewhere can substantially change their expectations concerning the payoffs from attacking or defending the regime. Such dramatic revisions in beliefs, amplified by strategic complementarity in actions, may lead to a series of attacks in other countries. The period of crisis can be long-lasting, but will eventually come to an end.
- Heng Chen, Yang K. Lu and Wing Suen
The Power of Whispers: A Theory of Rumor, Communication and Revolution
International Economic Review
Vol. 57, Issue 1, February 2016, 89-116
[Technical Appendix]
We study how rumors mobilize individuals who take collective action. Rumors may or may not be informative, but they create public topics on which people can exchange their views. Individuals with diverse private information rationally evaluate the informativeness of rumors about regime strength. A rumor against the regime can coordinate a larger mass of attackers if individuals can discuss its veracity than if they cannot. Communication can be so effective that a rumor can have an even greater impact on mobilization than when the same story is fully believed by everybody. However, an extreme rumor can backfire and discourage mobilization.
- Navin Kartik, Frances Xu Lee and Wing Suen
Investment in Concealable Information by Biased Experts
RAND Journal of Economics
Vol. 48, Issue 1, Spring 2017, 24-43
We study a persuasion game in which biased—possibly opposed—experts strategically acquire costly information that they can then conceal or reveal. We show that information acquisition decisions are strategic substitutes when experts have linear preferences over a decision maker's beliefs. The logic turns on how each expert expects the decision maker's posterior to be affected by the presence of other experts should he not acquire information that would turn out to be favorable. The decision maker may prefer to solicit advice from just one biased expert even when others—including those biased in the opposite direction—are available.
- Heng Chen and Wing Suen
Aspiring for Change: A Theory of Middle Class Activism
Economic Journal
Vol. 127, Issue 603, August 2017, 1318-1347
We propose a regime change model in which people are uncertain about both the quality of a specific regime and governance in general. The poor perceive the current regime as bad, rationally infer that all governments are bad, and therefore believe mass movements are futile. The middle class are more sanguine about the prospect of good government, and believe that collective action is effective because they expect many fellow citizens to share the same view. This coordination game with incomplete information does not admit monotone equilibrium but exhibits multiple interval equilibria, where middle class people are more likely to attack the regime.
- Jimmy Chan, Alessandro Lizzeri, Wing Suen, and Leeat Yariv
Deliberating Collective Decisions
Review of Economic Studies
Vol. 88, Issue 2, April 2018, 929-963
We present a dynamic model of sequential information acquisition by a heterogeneous committee. At each date, agents decide whether to vote to adopt one of two alternatives or continue to collect more information. The process stops when a qualified majority vote for an alternative. Three main insights emerge from our analysis and are consistent with an array of stylized facts regarding committee decision making. First, majority rule is more vulnerable than super-majority rules to the disproportionate influence of impatient committee members. Second, more diverse preferences, more patient members, or more unanimous decision voting rules lead to lengthier deliberation and more accurate decisions. Finally, balanced committees unanimously prefer to delegate deliberation power to a moderate chairman rather than be governed by a rule such as unanimity.
- Wen-Chung Guo, Fu-Chuan Lai, and Wing Suen
Downs Meets d'Aspremont and Company: Convergence versus Differentiation in Politics and the Media
International Journal of Industrial Organization
Vol. 60, September 2018, 96-125
Media firms have incentives to differentiate their news products to soften price competition. When consumers value cognitive consistency between the news they read and the policies they support, politicians are induced to propose more polarized policies to conform to a polarized media landscape. A stronger commercial motive or a weaker preference for editorial neutrality in the media exacerbates this effect and causes party policies to become more extreme. We find that prices for news products are higher when consumers have a demand for cognitive consistency, despite the fact that maximal product differentiation does not hold for media firms.
- Jun Han, Wing Suen and Junsen Zhang
Picking Up the Losses: The Impact of the Cultural Revolution on Human Capital Reinvestment in Urban China
Journal of Human Capital
Vol. 13, No. 1, Spring 2019, 56-94
This paper uses the Cultural Revolution in China as a quasi-experiment to analyze the long-term impact of interrupted education during an economic transition with many opportunities that reward educational qualifications. We focus on the remedial human capital investment decisions taken by individuals whose education was interrupted by the Cultural Revolution. We find substantial increases in schooling levels among the adult cohorts as they invest in continuous education to compensate for their interrupted schooling and to take advantage of new opportunities afforded by the economic transition. The initial lower level of education caused by the institutional shock can be largely remedied.
- Cheng Chen and Wing Suen
The Comparative Statics of Optimal Hierarchies
American Economic Journal: Microeconomics
Vol. 11, No. 2, May 2019, 1-25
Several classes of models of hierarchical organizations share two common properties: the characteristics at different levels of the hierarchy are complementary, but this complementarity does not extend beyond adjacent levels. We propose a unified yet simple approach to study comparative statics of organizational characteristics with endogenous number of hierarchical layers in all these models. We use this new approach to study organizational decision making, and show that increased delay cost incentivizes the organization to empower lower-level employees more than upper-level employees.
- Ettore Damiano, Li Hao and Wing Suen
Learning while Experimenting
Economic Journal
Vol. 130, Issue 625, January 2020, 65-92
An agent performing risky experimentation can benefit from suspending it to directly learn about the state. “Positive” information acquisition seeks news that would confirm the state that favors experimentation. It is used as a last-ditch effort when the agent is pessimistic about the risky arm before abandoning it. “Negative” information acquisition seeks news that would demonstrate that experimentation is futile. It is used as an insurance strategy to avoid wasteful experimentation when the agent is still optimistic. A higher reward from risky experimentation expands the region of beliefs that the agent optimally chooses information acquisition rather than experimentation.
- Frances Xu Lee and Wing Suen
Credibility of Crime Allegations
American Economic Journal: Microeconomics
Vol. 12, No. 1, February 2020, 220-259
[Supplementary Appendix]
The lack of hard evidence in allegations about sexual misconduct makes it difficult to separate true allegations from false ones. We provide a model in which victims and potential libelers face the same costs and benefits from making an allegation, but the tendency for perpetrators of sexual misconduct to engage in repeat offenses allows semiseparation to occur, which lends credibility to such allegations. Our model also explains why reports about sexual misconduct are often delayed, and why the public rationally assigns less credibility to these delayed reports.
- Heng Chen and Wing Suen
Radicalism in Mass Movements: Asymetric Information and Endogenous Leadership
American Political Science Review
Vol. 115, No. 1, February 2021, 286-306
Asymmetric information and diverse preferences for reform create an agency problem between opposition leaders and citizens. Dissatisfied citizens are unsure of how bad the current situation is but infer this information from the scale of the leader’s reform proposal. Because radical leaders have an incentive to exaggerate and mislead, to command credibility, they must paradoxically radicalize the proposal further as a way of signaling the necessity of change. Radicalism motivated by signaling is costly, as it reduces a movement’s chances of success. This mechanism also contributes to leadership radicalization when the leaders of movements arise as a compromise among diverse interests.
- Navin Kartik, Frances Xu Lee, and Wing Suen
Information Validates the Prior: A Theorem on Bayesian Updating and Applications
American Economic Review: Insights
Vol. 3, No. 2, June 2021, 165-182
[Online Appendix]
We develop a result on expected posteriors for Bayesians with heterogenous priors, dubbed information validates the prior (IVP). Under familiar ordering requirements, Anne expects a (Blackwell) more informative experiment to bring Bob’s posterior mean closer to Anne’s prior mean. We apply the result in two contexts of games of asymmetric information: voluntary testing or certification, and costly signaling or falsification. IVP can be used to determine how an agent's behavior responds to additional exogenous or endogenous information. We discuss economic implications.
- Chia-Hui Chen, Junichiro Ishida, and Wing Suen
Reputation Concerns in Risky Experimentation
Journal of the Europearn Economic Association
Vol. 19, Issue 4, August 2021, 1981-2021
[Online Appendix]
High-ability agents are more likely to achieve early success in risky experimentation, but learn faster that their project is not promising. These counteracting effects give rise to a signaling model with double-crossing property. This property tends to produce homogenization of quitting times between types, which in turn leads to some pooling in equilibrium. Low-ability agents may hold out to continue their project for the prospect of pooling with the high type, despite having a negative instantaneous net payoff. A war-of-attrition mechanism causes low-ability agents to quit only gradually over time, and to stop quitting for a period immediately before all agents exit.
- Ettore Damiano, Hao Li, and Wing Suen
Optimal Delay in Committees
Games and Economic Behavior
Vol. 129, September 2021, 449-475
[Online Appendix]
Delay after disagreement in committee decision making may foster information aggregation but is costly ex post. When there is an upper bound on delay that can be credibly imposed, repeated delays can improve the ex ante welfare of committee members. An ex ante optimal dynamic delay mechanism does not impose the maximum credible delay after each disagreement. Instead, it induces in equilibrium start-and-stop cycles where players alternate between making the maximum concession to avoid disagreement and making no concession at all. The start-and-stop feature is robust to modeling delay cost by discounting instead of money-burning, and the optimal mechanism is shown to be "redesign-proof" when there is also an upper bound on the number of rounds of delay that can be credibly imposed.
- Seongkyu Gilbert Park, Wing Suen, and Kam-Ming Wan
Call Auction Design and Closing Price Manipulation: Evidence from the Hong Kong Stock Exchange
Journal of Financial Markets
Vol. 58, March 2022, Article 100700
The Hong Kong Stock Exchange adopted a standard closing call auction mechanism in 2008 but suspended its operation ten months later due to suspicion of widespread price manipulation. The Exchange revamped the mechanism with manipulation-deterrence enhancements and relaunched it in 2016. We exploit this unique setting to examine the effect of call auction design on closing price manipulation. Our results indicate that the standard call auction mechanism is vulnerable to closing price manipulation. Under this mechanism, overnight price reversal is more pronounced on days when derivatives expire and on days when large orders were submitted just before the market close.
- Chia-Hui Chen, Junichiro Ishida, and Wing Suen
Signaling under Double-Crossing Preferences
Econometrica
Vol. 90, No. 3, May 2022, 1225-1260
[Online Appendix]
This paper provides a general analysis of signaling under double-crossing preferences with a continuum of types. There are natural economic environments where the indifference curves of two types cross twice, such that the celebrated single-crossing property fails to hold. Equilibrium exhibits a threshold type below which types choose actions that are fully revealing and above which they pool in a pairwise fashion, with a gap separating the actions chosen by these two sets of types. The resulting signaling action is quasi-concave in type. We also provide an algorithm to establish equilibrium existence by construction.
- Frances Xu Lee and and Wing Suen
Gaming a Selective Admissions System
International Economic Review
Vol. 64, No. 1, February 2023, 413-443
[Online Appendix]
A university uses both early-stage selection outcome (high school affiliation) and late-stage admission test outcome (standardized test scores) to select students. We use this model to study policies that have been proposed to combat inefficient gaming in college admissions. Increasing university enrollment size can exacerbate gaming and worsen the selection outcome. Abolishing standardized tests for university admissions increases gaming targeting high school admissions and worsens the selection outcome, while eliminating high-school ability sorting may improve the university selection outcome under some cost conditions of gaming. Committing to a lower-powered selection scheme can improve the selection outcome by reducing gaming behaviors.
- Heng Chen and and Wing Suen
Competition for Attention and News Quality
American Economic Journal: Microeconomics
Vol. 15, No. 3, August, 1-32
[Online Appendix]
Over the past decades the number of news outlets has increased dramatically, but the quality of news products has declined. We propose a model to reconcile these facts where consumers' attention allocation decisions not only depend on but also affect news outlets' quality choices. When competition is intensified by new entries, the informativeness of the news industry rises. Thus, attention is diverted from existing outlets, reducing their incentives to improve news quality, which begets a downward spiral. Furthermore, when attention becomes cheaper, a larger number of news outlets can be accommodated in equilibrium, but news quality still falls.
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