a research paper by Chris Wallace and David P Myatt.

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Abstract: In the context of a “beauty contest” coordination game (in which payoffs depend on the proximity of actions to an unobserved state variable and to the average action) players choose how much costly attention to pay to various informative signals; they endogenously select information sources and how carefully to listen to them. Each signal has an underlying accuracy (how precisely it identifies the state variable) and a clarity (how easy it is for players to understand what the signal says). The unique information-acquisition equilibrium has interesting properties: only a subset of signals are assigned positive weight and attention; these are the clearest signals available, even if such signals have poor underlying accuracy; the size of the subset shrinks as the complementarity of players’ actions becomes more acute; and, if actions are more complementary, the information endogenously acquired in equilibrium is more public in nature.

by Torun Dewan and David P Myatt

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Abstract: Followers wish to coordinate their actions in an uncertain environment. A follower would like his action to be close to some ideal (but unknown) target; to reflect his own idiosyncratic preferences; and to be close to the actions of others. He learns about his world by listening to leaders. Followers fail to internalize the full benefits of coordination and so place insufficient emphasis on the focal views of relatively clear leaders. A leader sometimes stands back, by restricting what she says, and so creates space for others to be heard; in particular, a benevolent leader with outstanding judgement gives way to a clearer communicator in an attempt to encourage unity amongst her followers. Sometimes a leader receives no attention from followers, and sometimes she steps down (says nothing); hence a leadership elite emerges from the endogenous choices of leaders and followers.

by Torun Dewan and David P Myatt

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• Also available: Earlier Version in PDF Format (from 28 July 2008)

Resubmitted to the American Journal of Political Science.

Abstract: We consider a government for which success requires high performance by talented ministers. A leader provides incentives to her ministers by firing those who fail. However, the consequent turnover drains a finite talent pool of potential appointees. The severity of the optimal firing rule and ministerial performances decline over time: the lifetime of an effective government is limited. We relate this lifetime to various factors including external shocks; the replenishment of the talent pool; and the leader’s reputation. Some results are surprising: an increase in the stability of government and the exogenous imposition of stricter performance standards can both shorten the era of effective government, and an increase in the replenishment of the talent pool can reduce incumbent ministers’ performance.

by David P Myatt and Chris Wallace.

• Download the Current Version in PDF Format (from 23 March 2009)
• Also available: Earlier Version in PDF Format (from 27 October 2008)

(currently in submission)

Oxford Economics Discussion Paper no. 411.

Abstract: In the context of macroeconomic coordination, studies of the social value of information distinguish sharply between private and public information. However, no information is truly public (that is, common knowledge) or private in the established sense. This paper develops a general approach by allowing for many informative signals each of which incorporates elements of both public and private information. A measure of relative publicity determines a signal’s equilibrium use and its social value. Output gaps (and hence social losses) arise when signals differ in their publicity: such differences drive a wedge between price-formation and expectations-formation processes. Turning to the effect of public announcements, and contrary to previous results, it is never socially optimal to withhold information completely, nor is it optimal to release perfectly public (or, indeed, perfectly private) information. Instead, when perfect communication is feasible, limited clarity enhances macroeconomic performance.

JEL Classifications: C72, D83, and E5.

Chris Wallace and I thank Torun Dewan for detailed discussions, and seminar participants at Essex, Helsinki, and Oxford, for helpful comments and suggestions.

by David P Myatt and Chris Wallace.

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forthcoming: Economic Journal 119(534), pp. 61-90, January 2009.

Abstract: A classic collective-action problem arises when private actions generate common consequences; for example, the private provision of a public good. In the context of a collective-action game, this paper asks: what shapes of public-good production function work well in the long run? Here, the “long run” corresponds to the behaviour of players engaged in a strategy-revision process which allows play to evolve over time, and hence move between equilibria. Welfare-maximising public-good production functions are those which yield nothing when the combined effort of players falls below some threshold, but otherwise maximally exploit the production-possibility frontier. Such production functions lead to games with multiple equilibria: coordinated teamwork is an integral component of successful collective actions. However, the optimal threshold is not too ambitious: when strategy revisions approximate best replies, it corresponds to the output that an individual who pays all private costs but enjoys only private bene?ts would be just willing to provide.

by Torun Dewan and David P Myatt.

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American Political Science Review, 102(3), pp. 351–368, August 2008.

Abstract: What is leadership? What is good leadership? What is successful leadership? Answers emerge from our study of a formal model in which followers face a coordination problem: they wish to choose the best action while conforming as closely as possible to the actions of others. Although they would like to do the right thing and do it together, followers are unsure about the relative merits of their options. They learn about their environment and the likely moves of others by listening to leaders. These leaders bridge differences of opinion and become coordinating focal points. A leader’s influence increases with her judgement (her sense of direction) and her ability to convey ideas (her clarity of communication). A leader with perfect clarity enjoys greater influence than one with a perfect sense of direction. When followers choose how much attention to pay to leaders, they listen only to the most coherent communicators. However, power-hungry leaders who need an audience sometimes obfuscate their messages, but less so when their followers place more emphasis on conformity than on doing the right thing.

In their Notes from the Editor section of the August 2008 issue of the APSR, the co-editors summarized the paper:

If party competition is important, of course, so too is party leadership, and this is the problem taken up by Torun Dewan and David P. Myatt in “The Qualities of Leadership: Direction, Communication, and Obfuscation.” Making public statements is doubtless one of the defining characteristics of a political leader. But to which leaders will people pay attention? To explore this question, the authors introduce a model in which leaders vary in how correct they are about policy and also in how precisely they can state that policy in their public statements. Their audience cares about the right policy but also about unity: Each person wants every other person as much as possible to support the same or similar policy. A public who cares mainly about unity might thus listen to a leader who states his policy clearly even though it could very well be wrong. A public who cares mainly about the correct policy would rather listen to a less clear but more correct leader. One interesting implication of their model is that if a leader wants to get as much public attention as possible, and not cede her audience to other leaders, the leader might purposefully obfuscate and make her public statements less clear, so that the audience would be compelled to spend more time figuring out what she is saying.

by Chris Wallace and David P Myatt.

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Review of Economic Studies, 75(2), pp. 499-527, April 2008.

Abstract:  This paper studies collective-action games in which the production of a public good requires teamwork. A leading example is a threshold game in which provision requires the voluntary participation of m out of n players. Quantal-response strategy revisions allow play to move between equilibria in which a team successfully provides, and an equilibrium in which the collective action fails. A full characterization of long-run play reveals the determinants of success; these include the correlation between players’ costs of provision and their valuations for the good. The addition of an extra “bad apple” player can “spoil the barrel” by destabilizing successful teams and so offers a rationale for limiting the pool of possible contributors.

by David P Myatt and Chris Wallace.

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Games and Economic Behavior, 62(1), pp. 67-76, January 2008.

Abstract: A public good is produced if and only if a volunteer provides it. There are many pure-strategy Nash equilibria in each of which a single player volunteers. Noisy strategy revisions (for instance, quantal responses) allow play to evolve. Equilibrium selection is achieved via the characterisation of long-run play as revisions approximate best replies. The volunteer need not be the lowest-cost player: relatively high-cost, but nonetheless “reliable” players may instead produce the public good. More efficient players provide when higher values are associated with lower costs. Voluntary open-source software provision offers a contemporary application.

JEL Classification: C72, C73, and H41.

Keywords: Volunteer’s dilemma; Public goods; Evolution; Equilibrium selection; Quantal response.

by Torun Dewan and David P Myatt.

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American Political Science Review, 101(4), pp. 827-845, November 2007.

Abstract: Party activists face a coordination problem: a critical mass—a barrier to coordination—must advocate a single policy alternative if the party is to succeed. The need for direction is the degree to which the merits of the alternatives respond to the underlying fundamentals of the party’s environment. An individual’s ability to assess the fundamentals is his sense of direction. These three factors—the barriers to coordination, the need for direction, and an individual’s sense of direction—combine to form an index of both the desirability and the feasibility of leadership. We offer insights into Michels’ Iron Law: a sovereign party conference gives way to leadership by an individual or oligarchy if and only if the leadership index is sufficiently high. Leadership enhances the clarity of intraparty communication, but weakens the response of policy choices to the party’s environment. Our model can also be applied to the coordination problems faced by instrumental voters in plurality-rule elections, and so relates to the psychological effect of Duverger’s Law.

In his Notes from the Editor section of the November 2007 issue of the APSR, Editor Lee Sigelman summarized the paper:

Harry S. Truman once remarked, “Men make history, and not the other way around. In periods where there is no leadership, society stands still. Progress occurs when courageous, skillful leaders seize the opportunity to change things for the better.” Thus, a key to understanding politics is understanding leadership. Torun Dewan and David P. Myatt help us do just that in “Leading the Party: Coordination, Direction, and Communication.” Dewan and Myatt use formal modeling tools to analyze the extent to which leaders can coordinate mass action. This question not only has important theoretical implications but also can aid our understanding of the real, day-to-day policy world.

by David P Myatt.

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Review of Economic Studies 74(1), pp. 255-281, January 2007.

Abstract: In a plurality-rule election, a group of voters must coordinate behind one of two challengers in order to defeat a disliked status quo. Departing from existing work, the support for each challenger must be inferred from the private observation of informative signals. The unique equilibrium involves limited strategic voting and incomplete coordination. This is driven by negative feedback: an increase in strategic voting by others reduces the incentives for a voter to act strategically. Strategic-voting incentives are lower in relatively marginal elections, after controlling for the distance from contention of a trailing preferred challenger. A calibration applied to the U.K. General Election of 1997 is consistent with the impact of strategic voting and the reported accuracy of voters’ understanding of the electoral situation.