Norms and the Evolution of Leaders Followership

• Authors: Esther Hauk.
• BSE Working Paper: 112310 | January 23
• Keywords: Networks , Leadership , norms , local interaction
• JEL codes: C72, D85
• Networks
• Leadership
• norms
• local interaction

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, along with the local interaction, which leads to clustering, is crucial for the survival of the Pareto-dominant actions. The evolution of leader and crowd follower- ship shows that leader followership can also be locally stable around Pareto-dominant leaders. The paper answers the questions of which leader should be removed and how to optimally place leaders in the network to enhance payoff-dominant play.