A Formal Model of Exit and Voice

29 Pages Posted: 31 May 2005

See all articles by Scott Gehlbach

Scott Gehlbach

University of Wisconsin-Madison

Date Written: February 23, 2006

Abstract

I reexamine Hirschman's classic text Exit, Voice, and Loyalty through a game-theoretic interpretation of the relationship between exit and voice. The model, which is general and applicable to diverse environments, treats exit as a costly decision which may be prevented through an appropriate choice of policy by the leadership of an organization. Voice - the capacity of an organization's members to participate in the setting of policy - is similarly costly, but provides a share of the surplus from avoiding exit. The formalization sheds light on the static and dynamic effects of exit, the conditions for the development of voice, the impact of loyalty, and the decision of organizational leaders to suppress voice and exit. I illustrate the model by revisiting Hirschman's analysis of exit and voice in the collapse of East German communism.

Keywords: Exit, Voice, Political Economy, Hirschman, game theory

JEL Classification: D71, D72, D78, N40, P16, P26

Suggested Citation

Gehlbach, Scott, A Formal Model of Exit and Voice (February 23, 2006). Available at SSRN: https://ssrn.com/abstract=731963 or http://dx.doi.org/10.2139/ssrn.731963

Scott Gehlbach (Contact Author)

University of Wisconsin-Madison ( email )

1050 Bascom Mall
Madison, WI 53706
United States
608-263-2391 (Phone)

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