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Leadership and peer effects in an organizations

10 May 2016 at 12:00 PM - 1:00 PM

Room 207, Campus on Viale Romania, 32

Speaker: Penelope Hernandez, Universidad de Valencia

Abstract: Consider an organization composed by a Principal (or a leader) and by a finite group of agents (or followers). The Principal has some ideal organization composition or vector of preferred actions one for each agent and can invest in costly socialization trying to instil this ”corporate culture” in all the agents of the organization. Each agent has as well her ideal action. When an agent makes a decision each period her behavior is driven by two competing motives: she wants her behavior to agree with her personal ideal action and she wants also her behavior to be as close as possible to the average behavior of her peers. Ideal actions or preferences evolve over time. There are two sources of preference (and therefore, action) change. On the one hand, there exists a costly corporate socialization effort exerted by the Principal trying to transform the ideal action of each agent into his own ideal action. On the other hand, each agent’s ideal action changes in the direction of actual behavior (self-persuasion or cognitive dissonance). We characterize the long-run outcomes of this situation and in particular in the ability of the Principal to fully instil the corporate culture in the members of the organization. We establish different scenario where the Principal never achieves his desired corporate culture. Moreover, the presence of non-conformist agents make a particular long -run outcomes.