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The paper analyses a dynamic model in
which the public is uncertain about the quality of the leader. The
quality of the leader is measured by the precision of her signal on the
state of nature. The public updates its beliefs on leader's quality
according to the ex-post relationship between the action that the leader
took and the state of nature. The leader has to choose between an
action which is vigorous, i.e., changes the status quo and a moderate action
i.e., maintain the current situation. The incumbent downsian leader
takes advantage of her discretionary power by picking the action that will
maximize the probability of being reelected. We show that, depending
on the public preference, a leader who has consolidated her position may
be too cautious while a leader who has not consolidated her position may
take risks which, are not on the interests of the public. We also
show that the probability of reelection is more then 0.5 even for the low
quality leader. |
