Cooperation by Design: Leadership, Structure, and Collective Dilemmas

Abstract

We return to the analysis of cooperation among interdependent rational individuals. We emphasize the limited impact of iteration (or repeated play) and explore the possibility of an alternative: intervention by rational agents, whom we call leaders. We show that leadership is more significant for initiating cooperation than for sustaining it. In addition, we identify two features of organizations that are critical in determining a leader's ability to initiate and sustain cooperation by structuring the incentives of his followers: the leader's capabilities (information and strategy sets) and reward structure (payoff function).