Leadership by Confidence in Teams

Abstract

We study endogenous signaling in teams 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 sufficient condition under which sender and receiver emerge endogenously in a stable equilibrium. This result implies that leadership in teams emerges through the leader's signaling incentives only based on his confidence.

Keywords: Endogenous Signaling, Team Production, Leadership

JEL Classification: C72, D82