Leaders and social norms: On the emergence of consensus or conflict

We propose a model where competing group leaders influence the social norm adopted in their group constrained by the norm being individually optimal for their members. Individuals are instrumental in enforcing such social norms through peer punishment. We show that there is a unique equilibrium in which there is either a consensus norm or two conflicting norms. A consensus norm is most likely in highly integrated societies, but even in these societies conflicting norms may emerge. Although the majority norm is generally the consensus norm, we characterize the conditions under which the minority norm is adopted as the consensus. In both types of equilibria conformists may not identify with the norm adopted by their group. We show that the intensity of conflict is increasing in the size of the minority group and decreasing in segregation. We also study the welfare and policy implications of our theory.