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A Reputational Model of Authority

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  • Nabil I. Al-Najjar

Abstract

: The paper provides a model where authority relationships are founded on reputation. The viability of authority is the result of subordinates' free-riding on each other challenges, reducing the frequency of challenges, and making reputations worth defending. The party with authority secures subordinates' compliance through the payment of rents to influence the extent of their failure to act collectively and exacerbate the free-rider problem they face. The model provides a framework to explain how the magnitude and form of these rents depend on the primitives of the environment and on the authority's design of its reputation. Applications to efficiency wages, dictatorships, and the notion of legitimacy are considered.

Suggested Citation

  • Nabil I. Al-Najjar, 1998. "A Reputational Model of Authority," Discussion Papers 1223, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  • Handle: RePEc:nwu:cmsems:1223
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    File URL: http://www.kellogg.northwestern.edu/research/math/papers/1223.pdf
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    References listed on IDEAS

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    1. Milgrom, Paul R, 1988. "Employment Contracts, Influence Activities, and Efficient Organization Design," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 42-60, February.
    2. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
    3. Akerlof, George A, 1984. "Gift Exchange and Efficiency-Wage Theory: Four Views," American Economic Review, American Economic Association, vol. 74(2), pages 79-83, May.
    4. Bernheim, B Douglas, 1984. "Rationalizable Strategic Behavior," Econometrica, Econometric Society, vol. 52(4), pages 1007-1028, July.
    5. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
    6. Cole, Harold L. & Mailath, George J. & Postlewaite, Andrew, 1998. "Class systems and the enforcement of social norms," Journal of Public Economics, Elsevier, vol. 70(1), pages 5-35, October.
    7. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
    8. Milgrom, Paul & Roberts, John, 1982. "Predation, reputation, and entry deterrence," Journal of Economic Theory, Elsevier, vol. 27(2), pages 280-312, August.
    9. Pearce, David G, 1984. "Rationalizable Strategic Behavior and the Problem of Perfection," Econometrica, Econometric Society, vol. 52(4), pages 1029-1050, July.
    10. Grossman, Sanford J & Hart, Oliver D, 1983. "An Analysis of the Principal-Agent Problem," Econometrica, Econometric Society, vol. 51(1), pages 7-45, January.
    11. Nabil Al-Najjar & Rann Smorodinsky, 1996. "Pivotal Players and the Characterization of Influence," Discussion Papers 1174, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    12. Wintrobe,Ronald, 1998. "The Political Economy of Dictatorship," Cambridge Books, Cambridge University Press, number 9780521583299, May.
    13. Nabil I. Al-Najjar & Rann Smorodinsky, 1996. "Pivotal Players and the Characterization of Influence," Discussion Papers 1174R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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