Role Swap: When the Follower Leads and the Leader Follows

Jan Libich, Martin Machacek and Dat Nguyen
Additional contact information
Martin Machacek: VSB-TU Ostrava

Czech Journal of Economics and Finance (Finance a uver), 2021, vol. 71, issue 4, 282-305

Abstract: The game theoretic literature has commonly explored circumstances in which the players are identical. In the real world, strategic actors such as competing firms or political parties are however heterogeneous. Most importantly, their payoffs across the various possible outcomes generally differ. We consider payoff heterogeneity within a more general ‘Stochastic leadership’ framework. It allows for probabilistic revisions of each player’s initial actions - upon observing what the others have done. The analysis shows that under Stochastic leadership it is the exact payoffs, not just their ranking, that affects the set of (subgame-perfect) equilibria. This is consistent with experimental studies that show payoff heterogeneity to hinder cooperation and aggravate conflict by moving the players away from the focal (symmetric/equitable) outcome. Furthermore, we demonstrate that if the payoffs are sufficiently asymmetric the players may essentially swap their roles in coordination and anti-coordination games. In particular, we derive circumstances within the Battle of the sexes, Stag hunt and Hawk and dove games under which the Stochastic follower (the more flexible player with a higher revision probability) starts behaving as the Stackelberg leader. Our main real-world example is from the area of climate change agreements between major countries.

Keywords: heterogeneity; asymmetric payoffs; leadership; climate change; battle of the sexes (search for similar items in EconPapers)
JEL-codes: C72 D74 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://journal.fsv.cuni.cz/mag/article/show/id/1491 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:71:y:2021:i:4:p:282-305

Access Statistics for this article

More articles in Czech Journal of Economics and Finance (Finance a uver) from Charles University Prague, Faculty of Social Sciences Contact information at EDIRC.
Bibliographic data for series maintained by Natalie Svarcova ().