Why Doesn't the Principal Help the Agent?
32 Pages Posted: 31 Jan 2010
Date Written: January 10, 2010
This paper endogenizes the strategic relationship between a principal (a player with authority) and an agent (a player without authority), and shows that a submissive relationship is the unique equilibrium outcome. That is, the agent voluntarily chooses a task that will increase the principal's payoffs, but the principal does not help the agent in the same way. Instead, the principal chooses a task that will decrease the agent's payoffs. This paper also endogenizes the (Stackelberg) leadership, and shows that delegation of leadership with a submissive relationship is optimal.
Keywords: Authority, Leadership, Strategic Relationship
JEL Classification: D82, D74, G30
Suggested Citation: Suggested Citation