Leadership and Information
Mana Komai, Mark Stegeman, Benjamin E. Hermalin
American Economic Review · 2007 · Volume 97 · Issue 3
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. (JEL D23, M54)
Keywords
Organizational Behavior, Transaction Costs, Property Rights, Personnel Economics: Labor Management
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