Can the free-riding problem be alleviated by decisive leadership?

The influence of the informal leader on his followers depends on his capacity to collect information unavailable to other members of his group. The signaling of this information to other team members can increase the level of their individual contributions to the common good and prevent free riding (Meidinger & Villeval, 2002). In particular, the information that would be useful to the leader in this context amounts to the returns from various levels of individual contributions to the common good. However, because the leader desires to increase individual contributions, he has an incentive to lie to his followers regarding the returns from their inputs. Consequently, for a leader, communicating credible information to his followers is costly (Meidinger & Villeval, 2002). Even so, an informal leader who decides to communicate credible information to his followers can still achieve significant positive results. There are two common methods in which informal leaders can transmit credible information to their followers: leading-by-example and leading-by-sacrifice (Meidinger & Villeval, 2002).

A leader who sets an example of ideal behaviour or voluntarily sacrifices something for the good of the group can expect such actions to induce his rational followers to follow his lead. This method is known to work even when the leader wants to mislead his followers (Guth et al. 2004). All experiments, in which a leader of the group decides on his contribution to the public good and his decision is then communicated to other group members who contribute simultaneously thereafter, have shown that in such groups all group members are more likely to contribute more to the public good than in leaderless groups where all group members contribute simultaneously to the public good (Guth et al. 2004). Similarly, announcing the size of the previous leading contributions towards a public good has been shown to increase the average level of contributions that follow (Meidinger & Villeval, 2002).

References

Guth, W., Levati, M. V., Sutter, M., van der Heijden, E. (2004). Leadership and cooperation in public goods experiments. Retrieved from ftp://papers.econ.mpg.de/esi/discussionpapers/2004-29.pdf.

Meidinger, C. & Villeval, M.-C. (2002). Leadership in teams: Signaling or reciprocating? Retrieved from http://old-hha.asb.dk/nat/workshop/MCV1612.PDF.