Research

2026

1. Hierarchies

   Incentives in Information Hierarchy: Why Middle Managers Suffer

   Peter Shum and Curtis R. Taylor

   Duke University. Working Paper , 2026

   Abs PDF

   This paper endogenizes the provision of incentives in a hierarchical information network. Leaders in the hierarchy directly observe the state of common productivity and exert effort accordingly. Followers in subsequent tiers must infer the state by observing the effort of a member one tier above them. This generates a network game in which all members, except those without followers, have signaling obligations. The question I address is how the division of output influences incentives within this game. I show that the socially optimal division implies that signaling obligations reduce compensation and payoffs. In contrast, when a leader chooses the division of output to maximize his own payoff, members in the middle of the hierarchy suffer the lowest payoffs. This result is consistent with numerous studies that find middle managers suffer the highest burnout rate in large firms and organizations. In the context of my model, this occurs because middle managers have relatively large signaling obligations and low compensation.

2. Polarization

   Rent Extraction through Polarization: Monopsonistic Lobbying and Majority Coalitions

   Peter Shum

   National Chung Cheng University. Work in Progress , 2026

   Abs Slides

   I isolate a non-electoral force behind polarization. Interest groups seek the support of k politicians and lobby through an informational subsidy, a club good shared by all supporters. The shared subsidy must cover the farthest supporter’s cost, so extreme groups pay more and politicians extract rents by moving toward them. The force vanishes when groups compete or targeted payments dominate. Even with uniformly distributed groups, politicians in the unique equilibrium diverge into blocs. A simple-majority requirement produces the most polarized legislature. The same game describes multi-sourcing spatial price discrimination and procurement, where a uniform-price auction fully implements cost-minimizing supplier locations.

2022

1. Networked Market

   Underinvestment in Buyer‑Seller Network

   Peter Shum

   National Chung Cheng University. Work in Progress , 2022

   Abs

   I construct a network formation model for the buyer‑seller networked market from Kranton and Minehart (2001). Agents anticipate 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.