We explain why organizations that limit the voice of their agents can benefit from granting them an exit option. We study a hierarchy with a principal, a productive supervisor and an agent. Communication is imperfect in that only the supervisor can communicate with the principal, while the agent

This paper examines an important aspect of federalism: the effect of a secession threat on the union’s productivity. Productivity requires a compliance maintenance regime with credible punishment. An exit option gives a government the alternative of opting out of the union rather than suffer

consider exit option contracts: the party without decision rights is entitled to prematurely terminate the relation after the other party’s choice. We show that under such a contract it is always optimal to assign authority to the informed and not to the uninformed party, irrespective of the parties

choosing. The optimal time of payment depends on the agent’s and the principal’s outside options. Examples when the optimal time is random include the case when the agent can be fired, after having been paid a severance payment, and then replaced by another agent; and the case when the agent

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We introduce a post-entry liquidity constraint to the standard model of a firm with serially correlated profitability and an irreversible exit decision. We assume that firms with no cash holdings and negative cash ow must either exit or raise new cash at a transaction cost. This creates a

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Abstract The paper presents a formal model of the exit and voice framework proposed by Hirschman

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