American Economic Review Vol. 97 No. 3 2007

Leadership and Information

Mana Komai¹; Mark Stegeman²; Benjamin E. Hermalin³

¹ Department of Economics, St. Cloud State University, 356 SH, St. Cloud, MN, 56301. · ² Department of Economics, University of Arizona, McClelland Hall, Room 401, Tucson, AZ 85721-0108. · ³ Haas School of Business and Department of Economics, University of California at Berkeley, S545 Student Services Bldg. #1900, Berkeley, CA 97420-1900.

Abstract

An organization makes collective decisions through neither markets nor contracts. Instead, rational agents voluntarily choose to follow a leader. In many cases, incentive problems are solved: the unique nondegenerate equilibrium achieves the first best, even though every agent has incentives to free ride. The leader has no special talents but is distinguished by getting exclusive access to information. A crucial feature is that the leader reveals part but not all of her information. It is this maintenance of informational asymmetry that permits achieving the first best.

DOI

10.1257/aer.97.3.944

Volume

97

Issue

3

Pages

944-947

Language

en

Sources

openalex crossref bibtex:phds-export.bib

Cite

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