Leading for the long term

How do leaders build credibility, and what happens if they can’t or don’t? Existing economic models of leadership consider static settings only and, thus, are not well-suited for addressing such issues. Moreover, an important phenomenon of leadership is its persistence. To allow for credibility and other behaviors that make sense only in repeated games (such as the followers’ paying the leader tribute), this paper considers a repeated-game version of (Hermalin, B.E., 1998. Toward an economic theory of leadership: leading by example. American Economic Review 88, 1188–1206) leadership model.