Seminar in Microeconomics - Gabriele Gratton (UNSW Business School)
Tuesday 25 September 2018 (12h15 - 13h30) - Extranef - 109
More political capital affords a leader more power to influence a decision, if she is willing to spend capital on it. But by spending political capital, the leader also determines her future capital and power. We study how the initial levels of capital and the leader’s information jointly determine optimal leadership styles and the dynamics of power within an organization. We show that, conditional on disagreeing with others in the organization, better informed leaders are more likely to spend capital and increase their power over time. But the unconditional probability of spending capital peaks at intermediate levels of the leader’s information. Finally, more power may both increase or decrease the leader’s propensity to spend capital and accumulate power. Therefore, optimal organization design trades off the leader’s power to influence decisions with incentives to use power.