Leadership based on asymmetric information

Mana Komai, Mark W Stegeman

Research output: Contribution to journalArticle

20 Citations (Scopus)

Abstract

Rational players, unconstrained by contracts or formal authority, choose to follow a better-informed leader, whose action reveals part of her information. If the leader satisfies a credibility condition, then the unique nondegenerate equilibrium solves distinct shirking and coordination problems and achieves the first best. If credibility fails, as is more likely for a large organization, then followers ignore the leader, and equilibria are very inefficient. Appointing multiple leaders, or a high-cost leader, can restore credibility. If players invest privately in information, then a leader often appears endogenously. The equilibrium concept is an original extension of sequential equilibrium to continuous states.

Original languageEnglish (US)
Pages (from-to)35-63
Number of pages29
JournalRAND Journal of Economics
Volume41
Issue number1
DOIs
StatePublished - 2010

Fingerprint

Asymmetric information
Credibility
Authority
Sequential equilibrium
Shirking
Costs
Coordination problems
Follower

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Leadership based on asymmetric information. / Komai, Mana; Stegeman, Mark W.

In: RAND Journal of Economics, Vol. 41, No. 1, 2010, p. 35-63.

Research output: Contribution to journalArticle

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