Working Paper: CEPR ID: DP17477
Authors: Antonio Cabrales; Esther Hauk
Abstract: In this paper we model the interaction between leaders, their followers and crowd followers in a coordination game with local interaction.The steady states of a dynamic best-response process can feature a coexistence of Pareto dominant and risk dominant actions in the population. The existence of leaders and their followers, plus the local interaction, which leads to clustering, is crucial for the survival of the Pareto dominant actions. The evolution of leader and crowd followership shows that leader followership can also be locally stable around Pareto dominant leaders. The paper answers the questions (i) which Leader should be removed and (ii) how to optimally place leaders in the network to enhance payoff dominant play.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| presence of leaders who adopt Pareto dominant actions (D71) | stabilization of the adoption of these actions among followers (M54) |
| clustering of followers around charismatic leaders (D70) | survival of beneficial social norms (Z13) |
| removal of a risk dominant leader (D79) | enhancement of the spread of Pareto dominant actions (C72) |
| charisma of leaders (D73) | likelihood of successful norm adoption (C52) |
| optimal placement of leaders within a network (D85) | emergence of social norms (Z13) |
| clustering leaders of the same type (C38) | maximization of the probability of achieving a Pareto efficient outcome (D61) |
| existence of at least one risk dominant leader (D81) | persistence of risk dominant strategy (C73) |