Endogenous Leadership Research Articles

Endogenous timing in tax competition: The effect of asymmetric information

AbstractThis study explores the effects of asymmetric information on endogenous leadership in a simple tax competition environment. The study models a two‐country economy where one country is informed about its own and opponent's productivity of private goods, while the other country only knows its productivity. The results show that each type of informed country has an incentive to pretend to be the other type, which leads to a Stackelberg outcome endogenously, while the simultaneous move is the unique outcome under complete information. Under the Stackelberg outcome, the uninformed country moves first and the informed country moves second. Moreover, ex‐post social welfare under asymmetric information can become larger than that under complete information, because the uninformed country chooses a less aggressive tax rate under asymmetric information. These results depend on the type of uncertainty, and capital ownership and share.

Endogenous leadership and sustainability of enhanced cooperation in a repeated interactions model of tax competition: Endogenous leadership in tax competition

AbstractIn this study, the endogenous timing of moves is analyzed in an infinitely repeated game setting of capital tax competition between a subgroup (a tax union) of countries agreeing on partial tax harmonization and outside countries. It is shown that in a subgame perfect equilibrium of the infinitely repeated tax competition game, they simultaneously set capital taxes in every stage game when a tax union comprises similar countries with respect to productivity, whereas they may set capital taxes sequentially in every stage game when a tax union comprises dissimilar countries. This finding is significantly different from Ogawa (2013), although we also assume that capital is owned by the country's residents, as in Ogawa's model. This is because a disadvantaged member country of the tax union would suffer from larger losses when a tax union comprising dissimilar countries, and thus the tax union will choose the strategy of moving Late for the sake of sustaining tax harmonization to avoid such losses.

Эндогенное формирование в команде лидерства по Штакельбергу. Эффект образования коалиции

The article engages in a theoretical investigation of the possibility of implementing the Stackelberg strategy within a team. It is assumed that the team gene-rates aggregate income that increases as the efforts invested by each agent intensify, subject to the law of diminishing returns. The goal of each agent in a team is to maximize his own individual gain. In order to achieve an outcome that is Paretopreferable over Nash equilibrium, two approaches may be used: identifying a leader or forming a smaller group (coalition) within the team whose members, in pursuance of increased individual gains, choose the route that maximizes coalition gains. It is shown that the advent of a coalition in a team results in Pareto-improvement in a simultaneous game. We analyse the possibility of endogenous leadership forming according to the Stackelberg model when using the mechanism of timing decisions. It is established that under autonomy of all team members, leadership formation can only be confidently predicted in specific individual cases. In a significantly more general case, all of the prerequisites for the formation of leadership are created by the presence of a single coalition interested in implementing the Stackelberg strategy.

Radicalism in Mass Movements: Asymmetric Information and Endogenous Leadership

Asymmetric information and diverse preferences for reform create an agency problem between opposition leaders and citizens. Dissatisfied citizens are unsure of how bad the current situation is but infer this information from the scale of the leader’s reform proposal. Because radical leaders have an incentive to exaggerate and mislead, to command credibility, they must paradoxically radicalize the proposal further as a way of signaling the necessity of change. Radicalism motivated by signaling is costly, as it reduces a movement’s chances of success. This mechanism also contributes to leadership radicalization when the leaders of movements arise as a compromise among diverse interests.

Product Differentiation in a Vertical Structure

Abstract We consider final goods producers’ preference for horizontal product differentiation in the presence of strategic input price determination. Final goods producers may not prefer maximal differentiation but may prefer moderate differentiation under both Cournot and Bertrand competition in the final goods market if product differentiation does not increase the market size significantly and there is either free entry in the input market or the input supplier has increasing returns to scale technology. Thus, we provide a new rationale for moderate product differentiation. Our reasons are different from the existing reasons of mixed pricing strategy, endogenous leadership, no-buy option for the consumers and the relative performance incentive schemes.

Community-as-pedagogy: environmental leadership for youth in rural Costa Rica

This mixed-methods study examines an informal place- and community-based environmental education program implemented for rural, underserved high school students in Costa Rica’s bio-culturally diverse Osa Peninsula. Using a community-as-pedagogy framework built on Paulo Freire’s concept of a problem-posing education, we investigate how pedagogically-positioned social relationships mediate students’ knowledge, perceptions, and leadership. We find linkages between existing community resources and endogenous environmental leadership, and suggest how making those connections strengthens students’ perceptions of their social relationships and their ability to create meaning and take action. Through the program, students show an increase in knowledge about their local environment. They critically and socially engage with that new information, further developing networking skills in the context of community-informed environmental issues. After participating in the program, the students describe environmental leadership as requiring persistence, forethought, and a willingness to care for both the environment and community.

Endogenous Mergers and Leadership Acquisition in Cournot Oligopolies

I set up an endogenous merger model in which, whenever fi rms agree to join in a coalition, the new entity acquires the leadership in a symmetric Cournot oligopoly. I first explore the case of a single merger and show that, despite being such merger pro table irrespective of the number of participants, only two endogenous equilibria are possible: either a bilateral coalition or an n - 1-fi rm coalition. I then allow for multiple coalitions and show that merger waves often occur as a fi rms' response to the exclusion of monopolization. In other cases, even if monopolization is allowed, the grand coalition does not form and at least one fi rm prefers to act as a follower. The model provides an explanation of why bilateral mergers are observed in almost every industry, even where synergies are unlikely and why it is possible to observe a single large entity behaving as a market leader. Furthermore, it provides a justi fication of the strategic nature of merger waves as a response to the exclusion of monopolization. I also check how my results vary with different ex-ante merger policies. Moreover, it is shown that bilateral mergers between identical fi rms generating no synergies can be bene ficial to both consumers and producers.

Endogenous Leadership in Tax Competition: A Combination of the Effects of Market Power and Strategic Interaction

Abstract This paper extends Kempf and Rota-Graziosi (2010, “Endogenizing Leadership in Tax Competition.” Journal of Public Economics 94 (9):768–776) and Hindriks and Nishimura (2015, “A Note on Equilibrium Leadership in Tax Competition Models.” Journal of Public Economics 121:66–68) by jointly considering the effects of market power and strategic interaction in tax competition. We depict the regional asymmetry as different slopes and different vertical intercepts of the inverse demand for capital. In our setup, the risk-dominant equilibrium in which the large region leads is regained. Moreover, dissimilar to Kempf and Rota-Graziosi (2010, “Endogenizing Leadership in Tax Competition.” Journal of Public Economics 94 (9):768–776) and Hindriks and Nishimura (2015, “A Note on Equilibrium Leadership in Tax Competition Models.” Journal of Public Economics 121:66–68), we show that with a large market demand and a low capital endowment, the leadership by the large region can still be Pareto-dominant even if the asymmetry is very small.

Wars of Succession

ABSTRACTI analyze a model of bargaining, war, and endogenous leadership turnover in which (1) leader attributes affect war outcomes and (2) war can insulate settlements from renegotiation. Shifts in bargaining power caused by leadership turnover are endogenous and discontinuous, but sufficiently decisive war outcomes can solve the associated commitment problem. In contrast to other models where the shadow cast by a hawkish successor encourages moderation toward a dovish incumbent, the foreign state attacks instead—despite a dovish incumbent’s known preference for peace—using war to lock in a settlement that would otherwise be lost to future leadership turnover. I discuss the theory’s implications for widening the empirical scope of the commitment problem explanation for war to limited wars over relatively lower stakes and for integrating the politics of leadership turnover with the study of strategic rivalries.

LEADERS, FOLLOWERS, AND ASYMMETRIC LOCAL TAX POLICY DIFFUSION

ABSTRACTComplementing recent theoretical models of tax competition with endogenous leadership, we empirically model local policy diffusion as a dynamic asymmetric process. Using a setting where local option sales taxes rapidly transitioned from nonexistence to ubiquity, we construct a policy leadership index to classify jurisdictions as leaders or followers. Using models that control for vertical tax competition effects, we show how asymmetric leader–follower dynamics characterize horizontal tax competition over the three decades that follow. A placebo test further supports our main conclusions. This methodological approach could be adapted to other settings where policies exhibit both extensive and intensive margins.

Endogenous Price Leadership and the Strategic Acquisition of Information

We model a differentiated Bertrand duopoly in which a firm's earlier knowledge of market demand than its competitor results in endogenous price leadership with the information advantaged firm leading. In such a setting with second-mover advantage, we then study the firms’ incentives to acquire information and analyze an information acquisition game. Both (i) neither firm acquiring information and (ii) one firm acquiring information can arise as subgame perfect equilibrium, but both firms acquiring information is never an equilibrium outcome, even if information is free. Information may have a negative value if it causes a change in the timing of price competition.

Endogenous timing, market research, and demand uncertainty

This paper develops an endogenous timing model where market demand is uncertain but it is possible to conduct market research before production. If market research has either high or low costs, the model generalizes and encompasses the classical results in Hamilton and Slutsky (1990) and Sadanand and Sadanand (1996). For intermediate market research costs, however, a qualitatively new scenario emerges, where every pure-strategy equilibrium involves endogenous leadership.

Lessons of endogenous leadership in Nigeria: innovating to reduce waste and raise incomes in the cassava processing and goat-keeping systems

Agricultural innovations are increasingly emerging from African research scientists. This paper looks at an innovation developed by animal scientists at the University of Agriculture Abeokuta in Nigeria. They identified a method for drying cassava peels, which creates an income source for rural women, reduces environmental waste, and raises the income of goat herders by transforming the cassava waste into animal feed. Initially funded by a World Bank grant, this paper addresses the challenges of securing donor funding for local innovations and presents an argument for a new model of development that supports locally driven solutions to current development issues.

Endogenous leadership in incentive contracts

We study the effect of leadership on incentive contracts in a moral-hazard framework. In our model, agents are allowed to choose the timing of their actions. The agents may choose their effort levels simultaneously or sequentially. We show that relative performance evaluation leads to a subgame in which agents make simultaneous effort choices, whereas joint performance evaluation yields a subgame in which agents make sequential effort choices. Since agents exert more effort in the sequential game, the principal uses joint performance evaluation to induce the leader–follower relationship among agents.

Managers Who Lack Style: Evidence from Exogenous CEO Changes

We study managerial style effects in investment decisions, financing policies, and firm profitability by examining exogenous CEO changes arising from deaths, health issues, and natural retirements. In a comprehensive panel of 8,615 Compustat firms from 1990 to 2007, we find that policy changes and profitability changes subsequent to exogenous turnover do not display abnormally high levels of variability. This evidence casts serious doubt on the hypothesis that managerial style effects play a causal role in firms' investment and financing decisions. We do detect abnormally high levels of variation in policies and profitability after endogenous leadership changes arising from forced CEO turnover. While this is unlikely to reflect a causal relation, it does suggest that underperforming firms tend to simultaneously change both managers and policies. In contrast to prior work, we find no convincing evidence that managers who serve at multiple firms tend to adopt a common style across employers. We also offer some methodological points on testing for the presence of managerial style effects in corporate decisions.

To lead or not to lead: Endogenous sequencing in public goods games

We compare the influence of endogenous leadership on group's contributions in a public goods game with an exogenously appointed leader and find that groups with voluntary leaders outperform groups with involuntary leaders. The decision to contribute last does not undermine cooperation.

Endogenous Leadership Selection and Influence

In social dilemmas, leading a team by making heroic efforts may prove costly, especially if the followers are not adequately motivated to make similar sacrifices. Attempting to understand what motivates these seemingly selfless individuals to lead, we report the results of a two-stage public good experiment with endogenous timing. Even though it turns out to be costly on average, a large proportion of our subjects volunteer to lead. Our findings suggest that a fraction of these leaders are socially concerned, while others expect to distill some personal gain, possibly of non-pecuniary nature. The composition of the team also matters, as publicizing certain attributes of a subject's teammates has an impact on her decision to lead. Lastly, though voluntary leaders improve efficiency in their team, they are not necessarily more influential than randomly imposed leaders.

Endogenous Leadership: Selection and Influence

Endogenous Leadership: Selection and Influence

Endogenous Leadership in Teams

In this paper we study the mechanics of “leading by example” in teams. Leadership is beneficial for the entire team when agents are conformists, i.e., dislike effort differentials. We also show how leadership can arise endogenously and discuss what type of leader benefits a team most.

Endogenous Leadership in a New Market

In this article I analyze strategic investment under uncertainty in a new market, where firms face a tradeoff between commitment and flexibility. The model predicts asymmetric equilibria under fairly general conditions, even though firms are ex ante identical and have symmetric opportunities to enter the market. In equilibrium, one firm commits to early investment and the other firm follows a wait-and-see strategy. In the ex post outcome, firms end up with asymmetric sizes if the market profitability turns out close to, or lower than, expected; firms end up in symmetric position if the market turns out highly profitable. If uncertainty is small, the model yields (approximately) Stackelberg outcomes.