Optimal Two Stage Committee Voting Rules

Abstract:     
We study option management by committee. Analysis is illustrated by tenure decisions. Our innovations are two-fold: we treat the committee's problem as one of social choice, not information aggregation; and we endogenise the outside option: rejecting a candidate at either the probationary or tenure stage return the committee to a candidate pool. For committees with N members, we find: (1) a candidate's fate depends only on the behaviour of two `weather-vane' committee members - generalised median voters; (2) enthusiastic assessments by one of these weather-vanes may harm a candidate's chances by increasing others' thresholds for hiring him; and (3) sunk time costs may lead voters who opposed hiring a candidate to favour tenuring him, even after a poor probationary performance. We characterise the optimal voting rule when N=2. A patient or perceptive committee does best with a (weak) majority at the hiring stage and unanimity at the tenure stage. An impatient or imperceptive committee does best under a double (weak) majority rule. If particularly impatient or imperceptive, this rule implies that any hire is automatically tenured. Perversely, the performance of a patient, imperceptive committee improves as its perceptiveness further declines.

Keywords: strategic voting, real options, tenure

JEL Classifications: C73, D71, D72, D80, G12

Working Paper Series