Title page for ETD etd-06162004-123403


Type of Document Dissertation
Author Komai, Mana
Author's Email Address mkomai@vt.edu
URN etd-06162004-123403
Title An Economic Theory of Leadership
Degree PhD
Department Economics
Advisory Committee
Advisor Name Title
Eckel, Catherine C. Committee Chair
Lutz, Nancy A. Committee Member
Keywords
  • Efficiency
  • Organization
  • Power
  • Leadership
  • Information
Date of Defense 2004-05-25
Availability unrestricted
Abstract
This dissertation develops an economic theory of leadership based on assignment of information.

Common theories assume that organizations exist to reduce transaction costs by replacing

imperfect markets with incomplete long term contracts that give managers the power to command

subordinates. This view reverses all of these premises: I study an organization in which

it is costless to transmit and process information, contracts exist in the backgound if at all,

and agents are not bound to the organization. The organization is held together by economies

of scale in generating information and by the advantages of controlling access to that information.

The minimalist model of organizations produces a minimalist theory of leadership:

leaders have no special talent but are leaders simply because they are given exclusive access to

certain information. A single leader induces a first best outcome if his incentives are aligned

with his subordinates. If a single leader is not credible, then diluting the power of leadership

by appointing multiple informed leaders can ensure credibility and improve e.ciency but can

not produce the first best. If agents are di.erentiated by their costs of cooperation the most

cooperative player is not necessarily the best leader. In this scenario, the ability of the group

to sustain fully cooperative outcomes may depend on the player with the least propensity to

cooperate. Therefore, to maximize e.ciency (i.e., to maximize the range of circumstances in

which e.cient cooperation is sustainable), the group should sometimes promote less cooperative

people. Here, ”less cooperative” means lazy or busy rather than disagreeable. This dissertation

also applies the idea of leadership (endorsement) to voluntary provision of public goods.

I show that when the leader is unable to fully reveal his information expected contributions,

ex-ante, are unambigeously higher in the leader-follower setting. That is partial revelation of

information induces more contribution compared to full revelation or complete information. I

also show that if the utility functions are linear then ex-ante welfare is unambigeously higher

in the presence of an informed endorser.

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