Leadership by Confidence in Teams

Abstract

We study endogenous signaling by analyzing a team production problem with endogenous timing. Each agent of the team is privately endowed with some level of confidence about team productivity. Each of them must then commit a level of effort in one of two periods. At the end of each period, each agent observes his partner' s move in this period. Both agents are rewarded by a team output determined by team productivity and total invested effort. Each agent must personally incur the cost of effort that he invested. We show a set of sufficient conditions under which an agent chooses to become a leader or a follower depending on his confidence about reward from the team in a stable equilibrium. This means that a player endogenously becomes a signal sender or a signal receiver depending only on the cost-benefits from becoming a sender or a receiver.