American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
A Theory of Organizational Dynamics: Internal Politics and Efficiency
American Economic Journal: Microeconomics
vol. 10,
no. 4, November 2018
(pp. 94–130)
Abstract
We consider a three-member organization in which one member retires in each period and the incumbent members vote to admit a candidate to fill the vacancy. Candidates differ in quality and belong to one of two types, and majority-type members share the total rent of that period. We characterize the symmetric Markov equilibria with undominated strategies and compare the long-term welfare among them. Unanimity voting is better than majority voting at promoting long-term welfare. In addition, organizations with a certain degree of incongruity perform better in the long run than either harmonious or very divided organizations.Citation
Cai, Hongbin, Hong Feng, and Xi Weng. 2018. "A Theory of Organizational Dynamics: Internal Politics and Efficiency." American Economic Journal: Microeconomics, 10 (4): 94–130. DOI: 10.1257/mic.20160237Additional Materials
JEL Classification
- D23 Organizational Behavior; Transaction Costs; Property Rights
- D71 Social Choice; Clubs; Committees; Associations
- D72 Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
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