Yunan Li
Interests: Microeconomic Theory, Mechanism Design

Job Market Paper

Mechanism Design with Financially Constrained Agents and Costly Verification

A principal wishes to distribute an indivisible good to a population of budget constrained agents. Both valuation and budget are an agent's private information. The principal can inspect an agent's budget through a costly verification process and punish an agent who makes a false statement. I characterize the direct efficiency-maximizing mechanism. This direct mechanism can be implemented by a two-stage mechanism. Specifically, all agents report their budgets in the first stage. The principal then provides budget-dependent cash subsidies to agents and assigns the goods randomly (with uniform probability) at budget-dependent prices. In the second stage, a resale market opens, but is regulated with budget-dependent sales taxes. Agents who report low budget receive more subsidies in their initial purchases (the first stage), face higher taxes in the resale market (the second stage) and are inspected randomly. This implementation exhibits some of the features of some welfare programs, such as Singapore's housing and development board.


Approximation in Mechanism Design with Interdependent Values, Games and Economic Behavior, Available online 25 January 2016.

This paper studies the revenue maximization problem in environments wherein buyers have interdependent values and correlated types. We show that (1) when the system of feasible sets is a matroid and buyer valuations satisfy a single-crossing condition, the generalized Vickrey-Clarke-Groves mechanisms with lazy reserves (VCG-L) are ex-post incentive compatible and ex-post individually rational; (2) if, in addition, the valuation distribution satisfies a generalized monotone hazard rate condition, the VCG-L mechanism with conditional monopoly reserves is approximately optimal. Then we construct an ascending auction that implements the truth-telling equilibrium of a VCG-L mechanism in ex-post equilibrium. Finally, we discuss the connection between the VCG-L mechanisms and greedy algorithms studied in Lehmann et al. (2002) and deferred-acceptance auctions studied in Milgrom and Segal (2014), and the impact of competition by proving a Bulow and Klemperer (1996) type result.

Mechanism Design with Costly Verification and Limited Punishments

A principal has to allocate a good among a number of agents, each of whom values the good. Each agent has private information about the principal's payoff if he receives the good. There are no monetary transfers. The principal can inspect agents' reports at a cost and penalize them, but the punishments are limited. I characterize an optimal mechanism featuring two thresholds. Agents whose values are below the lower threshold and above the upper threshold are pooled, respectively. If the number of agents is small, then the pooling area at the top of value distribution disappears. If the number of agents is large, then the two pooling areas meet and the optimal mechanism can be implemented via a shortlisting procedure.

Efficient Mechanisms with Information Acquisition

This paper studies the design of ex ante efficient mechanisms in situations where a single item is for sale, and agents have positively interdependent values and can covertly acquire information at a cost before participating in a mechanism. I find that when interdependency is low and/or the number of agents is large, the ex post efficient mechanism is also ex ante efficient. In cases of high interdependency and/or a small number of agents, ex ante efficient mechanisms discourage agents from acquiring excessive information by introducing randomization to the ex post efficient allocation rule in areas where the information's precision increases most rapidly.

An Efficient Ascending Auction

This paper proposes an ascending auction that yields an efficient outcome when the seller is restricted to sell bundles whose elements form a basis of a matroid and agents have interdependent values. This ascending auction generalizes Bikhchandani et al. (2010) who assume agents have independent private values; and Perry and Reny (2005) who study multi-unit good auctions. The key feature of the auction is that agents are permitted to express different demands against different elements.

Endogenous Labor Market Cycles (with Cheng Wang)

We show that in a perfectly stationary physical environment of the labor market, moral hazard and optimal termination in long-term contracts can generate two-period and much longer cycles in employment and unemployment, and in other aggregate activities, including the creation and destruction of jobs, and the flows of workers entering and exiting employment. We argue that such a theory sheds light on the unemployment volatility puzzle, which has inspired many discussions in the literature.

Teaching Experience

Teaching Assistant:
Microeconomic Theory II (Graduate Level)
Development Economics
Intermediate Macroeconomics

Summer Math Camp (Graduate Level)


SAS Dissertation Completion Fellowship, University of Pennsylvania (2015-2016)
Sydney Weintraub Memorial Fellowship, University of Pennsylvania (2014-2015)
Xinmei Zhang Fellowship, University of Pennsylvania (2013-2014)
Benjamin Franklin Fellowship, University of Pennsylvania (2011-2013)

Selected Presentations
EconCon, Princeton (2016)
The 27th International Conference on Game Theory, Stony Brook (2016)
North American Summer Meeting of the Econometric Society, Philadelphia (2016)
Midwest Economic Theory and International Trade Conference, Rochester (2016)
Pennsylvania Economic Theory Conference (Poster), State College (2016)
Micro Student Lunch Seminar, New York University (2016)
New York Computer Science and Economics Day, New York (2016)
INFORMS Annual Meeting, Philadelphia (2015)
11th World Congress of the Econometric Society, Montreal (2015)
3rd Summer School of the Econometric Society, Tokyo (2015)
Asian Meeting of the Econometric Society, Taipei (2014)
Fudan Workshop on Economic Dynamics, Shanghai (2014)
14th ACM Conference on Electronic Commerce, Philadelphia (2013)

Referee Activities
Econometrica, Games and Economic Behavior, International Economic Review, Economic Theory, Theoretical Economics, Operations Research, Optimization Methods and Software, China Economic Review, SAGT 2014, WINE 2016


Professor Rakesh Vohra

Professor Steven Matthews

Professor Mallesh Pai


I am on the job market and will be available for interviews at the AEA meetings in Chicago from 1/6 to 1/8.