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Search Friction in Crowdfunding Market

This paper studies how search frictions affect price competition and funding allocation in the crowdfunding market theoretically and empirically. I develop a dynamic many-to-one matching model with fixed sample search, a la Burdett and Judd (1983) and show that borrowers employ mixed strategies in setting interest rates in unique stationary equilibrium. Empirically, by documenting a novel data on a large panel of fundraisers’ behaviors, I find persistent rate dispersion and funding mismatches, which is consistent with theoretical predictions induced by search friction. More importantly, model implies that in a many-to-one matching market, price dispersion caused by search frictions facilitates investor coordination and hence improves matching efficiency compared with that in a random matching environment. According to a non-parametric estimation, I find that with dispersed rates, coordination effect can improve aggregate funding probability by 28% compared with random matching situation.
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Research in Progress

A Model of Sticky Price in Dynamic Auction

This project studies the effect of sticky price in a dynamic bidding game with replacement of rivals and uncertainty of supply. I show that bidders’ expected revenues w.r.t. to price stickiness has an inverse-U relationship. When price adjustment is cost-less, agents bid lower prices but may stay longer in the market. When price adjustment is impossible, agents bid high price, trying to avoid being forwarded to next round and dominated by new competitors. In the intermediate level of price stickiness, the interaction of the two effects increases agents expected revenue.

A Debt Contract under Limited Enforcement

This project studies how limited enforcement affects design of non-linear debt contract with asymmetric information. The possibility of run-off without production and repayment creates an endogenous outside option for all types of agents. Therefore, besides that low type agents’ contracts are distorted, high types’ loan size will also shrink by a ironing from the top.