Uncertainty, Risk Attitudes and Endogenous Authority

Based on Knight's thought of uncertainty and authority, this paper provides a formal model for the issues of endogenous authority. We proved that the greater difference in risk attitude between the team members, the more likely the team would form a hierarchical structure in which the risk-taker becomes the leader and the risk-averter becomes the follower. Meanwhile, the greater difference in cognitive level between the team members, the more likely the team would form a hierarchical structure in which the member with higher cognitive level becomes the leader, and the member with lower cognitive level becomes the follower.