Leadership based on asymmetric information

Mana Komai, Mark Stegeman

Research output: Contribution to journalArticlepeer-review

20 Scopus citations

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 - Jan 29 2010

ASJC Scopus subject areas

  • Economics and Econometrics

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