The Shadow of Authority

Fernando Vega-Redondo (DEC) will talk about "The Shadow of Authority" (j/w Paolo Pin)  -- see description below
Where: BELSS -- our experimental lab on the 3rd floor of the Roentgen building
When: Wednesday April 30 at 17.30-18.20+

Fernando's description: I will discuss a simple model of how authority can operate in an organization. On the one hand, it may resort to providing explicit incentives, which lead subordinates to take the suitable actions by reacting to rewards or punishment. This is an effective way of doing it but it is costly, since the implementation of rewards or punishments require the use of resources. It is what I call the burden of authority, and relies on a backward-induction logic. Alternatively, the authority can achieve its objectives by focusing agents' attention in the mere possibility of using rewards and punishments. Formally, this involves the use of a forward-induction logic and requires no actual use of costly resources. This is what I call the shadow of authority. My plan is to present the model and argue that it may be useful for understanding how authority operates in the real world. But I will suggest as well that so far the model is badly in need of some empirical support. I do not have satisfactory examples of real-world cases that could be understood in line with the model, but I think there should be. So I wonder whether an "illuminating experiment" could be designed for that. In essence, the experiment would have to be able to control for features of the environment (conceived as a hierarchical "organization") that lead to either the use of forward- vs backward-induction logic in an otherwise similar context. To my knowledge, not much has been done along these lines in experimental setups.
The talk will be 95% theoretical, focusing on a model that studies how backward- and forward-induction logic can be used in a sequential game involving an arbitrary finite number of hierarchically related players.

We hope many will attend. If you have questions, contact Martin Dufwenberg (martin.dufwenberg@unibocconi.it), Joshua Miller (joshua.miller@unibocconi.it) or Fabrizio Iozzi (fabrizio.iozzi@unibocconi.it).