Joint with Andrew T. Little.
Political leaders often find it difficult to trust their subordinates. This can hinder their ability to collaborate and lead to suboptimal policy outcomes. A potential solution to this problem is kompromat: the collection and threat to release compromising information about subordinates. Using a cheap talk model, we demonstrate how kompromat can potentially improve policymaking by mitigating a political leader’s agency problem. Counterintuitively, we show that kompromat works because it benefits the actor who is the subject of damaging information. However, using kompromat to solve an agency problem comes at a cost. We also show that it sometimes forecloses all communication from an unbiased subordinate who would have provided truthful information in the absence of kompromat. Since kompromat works by threatening the reputation of subordinates, we analyze an extension that shows how common knowledge that an organization uses kompromat might be costly even if it is never leaked.