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Governance and Social Responsibility : The Leader Who Leads Least Leads Best?

April 2010

By Liz Warren-Pederson

New economics research by Associate Professor of Economics Mark Stegeman yields surprising insight into leadership.

Knowledge is power, but blissful ignorance can pay off, according to a new paper from associate professor of economics Mark Stegeman. The paper appears in the spring issue of The RAND Journal of Economics.

Economists rarely study leadership, but in his new paper “Leadership Based on Asymmetric Information,” Stegeman and co-author Mana Komai of Saint Cloud State University use game theory to tackle two classical problems that organizations face: incentive issues, or how to motivate people to work hard; and coordination problems, or how to get people to work together.

“Existing management literature suggests various ways to address these problems, but the two main themes are redesigning contracts and improving everyone’s information,” says Stegeman. “This paper goes in the opposite direction. Instead of using complex contracts to improve incentives, we leave contracts in the background and restrict the distribution of information.”

Stegeman and Komai set up a formal game that represents a simple organization and found that when the incentive for people to “free ride” is moderate, giving all the information to only one person — the leader — leads to more efficient outcomes than giving it to everyone.

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