Research

2024

1. Polarization

   The Polarizing Effect of Monopsony

   Peter Shum

   Duke University. Job Market Paper , 2024

   Abs Slides

   In contrast to the predictions of the Median Voter Theorem, polarization of politicians has been prevalent throughout political history, and even more so in recent times. I develop a model that connects lobbying incentives and the extreme platforms of politicians. The model explains how polarization, defined as more politicians choosing extreme platforms than centrist ones, may emerge from non-polarized primitives. The model is also applied to explain the suburbanization of the manufacturing industry by the rise of monopsony power. The two applications of the model differ in the decisions of the benefactors: the lobbyist has an exogenously determined political alignment, while the monopsonist endogenously decides the factory location after observing workers’ distribution.

2. Hierarchies

   Caught in the Middle: Incentive and Information Hierarchies

   Curtis Taylor, and Peter Shum

   Duke University. Working Paper , 2024

   Abs

   In large corporations, hierarchies among its employees are usually present. Previous literature establish models where the trans mission of information within a hierarchy mitigates coordination problems in teamwork. This paper endogenizes incentive provision in such settings. The results predict possibility of “fat top” structures which fits observational findings. This paper provides a novel explana tion of why middle managers suffer particularly in the corporate hierarchies.

2022

1. Networked Market

   Underinvestment in Buyer‑Seller Network

   Peter Shum

   Duke University. Work in Progress , 2022

   Abs

   I construct a network formation model for the buyer‑seller networked market from Kranton and Minehart (2001). Agents antici‑ pate resulting network structures and demand a transfer along with the costly link formation. My results predict that with moderate link formation cost, the potential deviation of the trading partners deters the formation of networked markets. The whole market may vanish under specific conditions. I also suggest some remedies for this under‑investment.