A Theory of Organizational Dynamics: Internal Politics and Efficiency
by    Hongbin Cai, Hong Feng, and Xi Weng

American Economic Journal: Microeconomics     10(4):94-130    

Keywords:Internal Politics, Organizational Efficiency, Organizational Dynamics


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.