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A Signalling Theory of Scapegoats

  • Segendorff, Björn

    (Dept. of Economics, Stockholm School of Economics)

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    This study investigates under what circumstances there exist a separating equilibrium in which competent leaders choose incompetent co-workers and incompetent leaders choose competent co-workers. The driving force for the competent leader is the insurance motive; if things go wrong he can blame the incompetent co-worker and remain his reputation of being competent. For the incompetent leader the expected gain from such an insurance is outweighed by its costs in terms of lower expected policy outcome. Co-workers are motivated by career opportunities allowing for conflicting interests between the leader and the co-worker.

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    File URL: http://swopec.hhs.se/hastef/papers/hastef0406.pdf
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    Paper provided by Stockholm School of Economics in its series SSE/EFI Working Paper Series in Economics and Finance with number 406.

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    Length: 20 pages
    Date of creation: 05 May 2000
    Date of revision:
    Handle: RePEc:hhs:hastef:0406
    Contact details of provider: Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
    Phone: +46-(0)8-736 90 00
    Fax: +46-(0)8-31 01 57
    Web page: http://www.hhs.se/Email:


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    1. Cho, In-Koo & Kreps, David M, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 179-221, May.
    2. Besley, Timothy & Case, Anne, 1995. "Does Electoral Accountability Affect Economic Policy Choices? Evidence from Gubernatorial Term Limits," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 769-98, August.
    3. Trueman, Brett, 1994. "Analyst Forecasts and Herding Behavior," Review of Financial Studies, Society for Financial Studies, vol. 7(1), pages 97-124.
    4. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-31, July.
    5. Murphy, K.J. & Gibbons, R., 1990. "Optimal Incentive Contracts in the Presence of Career Concerns : Theory and Evidence," Papers 90-09, Rochester, Business - Managerial Economics Research Center.
    6. Meyer, Margaret A & Vickers, John, 1995. "Performance Comparisons and Dynamic Incentives," CEPR Discussion Papers 1107, C.E.P.R. Discussion Papers.
    7. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
    8. Harrington, Joseph E, Jr, 1993. "Economic Policy, Economic Performance, and Elections," American Economic Review, American Economic Association, vol. 83(1), pages 27-42, March.
    9. Kenneth Rogoff, 1987. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc.
    10. Effinger, Matthias R. & Polborn, Mattias K., 2001. "Herding and anti-herding: A model of reputational differentiation," European Economic Review, Elsevier, vol. 45(3), pages 385-403, March.
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