Leading for the Long-Term

This paper builds on the model of leadership set forth by Hermalin ("Toward an Economic Theory of Leadership: Leading by Example," American Economic Review, forthcoming). A criticism of that earlier work is that it considers leadership in a static setting only. Yet an important phenomenon of leadership is its persistence. One aspect of leadership, for instance, that is unexplorable in a static setting is reputation: The leader develops a reputation for leading her followers well. To allow for reputation effects and other behaviors that make sense only in repeated games--such as followers paying their leader tribute--this paper considers a repeated-game version of Hermalin's earlier model