Exit, Voice, and Loyalty Model

[1] These concepts first appeared in Albert Hirschman's more broadly focused 1970 book, Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States.

Usually in this use the Citizen player is any group within a society ranging from a single individual to the citizenry as a whole.

[3] The EVL Model involves two agents and their responses to a change initiated before the game began.

EVL assumes that the change implemented before the game began was performed by the Government and negatively harms the Citizen.

Exit options are those in which the Citizen accepts the loss of the benefit and instead alters their behavior to get the best possible alternative.

Examples could include relocating assets to avoid a new tax, reincorporating a business to avoid new regulations, buying goods from a different store when the quality of the original diminishes, voting out the incumbent, etc.

[1][3] Loyalty options are ones where the Citizen chooses to put up with the new policy and not alter their behavior.

[1] Voice options do not have immediate payoffs but are intended to give the Government a chance to Respond to the Citizen and revert the policy.

This cost is the variable c. If the Government chooses to Ignore then the Citizen can still Exit or remain Loyal.

No matter what the Citizen chooses, they still have to bear the cost of using their Voice and so the payoff for Exit would be E - c and 0 - c for remaining Loyal.

[1] An important note is that the value the Government places on the Loyalty from the Citizen is in relation to the benefit it took.

Typically, the game can be assumed as having a precursory step in which the Government decides whether or not to implement the policy.

[1] Many of the applications of this theory involve the different ways in which the extensive form game resolves when the values of E, L, and c are adjusted.

A parallel can be drawn to the structural dependence of the state on capital within Structural Marxism where the state is seen as being dependent on capital for its existence and the capitalists have viable Exit options through their easily mobile assets while labor does not.

Within a week of Lehman Brothers declaring bankruptcy the United States Treasury drafted the Troubled Asset Relief Program which planned to spend $700 billion to buy assets from struggling banks and was passed two weeks later.

[1] The then Treasury Secretary Paulson said "you won't leave this room until you agree to take this money" to the heads of the largest banks during a meeting in Washington D.C.[1] Ford, General Motors, and Chrysler sent their chief executives to Congress to ask for a bailout of $25 billion from the Troubled Asset Relief Program.

Members of Congress initially refused the bailout and mocked the executives having flown private jets to the meeting.

[3] The automotive industry had to go through many more hurdles to receive any funds than members of the financial sector.

The automotive sector has much less mobile assets as factories take much longer to move outside the country compared to financial institutions and so can be thought of as having a much weaker Exit option.

[1] In this scenario the political party assumes the role of the Government and the group is the Citizen.

The EVL Model predicts that the Citizen will only use their Voice if they have a viable Exit option and the Government is dependent (E > 0, L > 1).

This includes leaving the organization, transferring to another work unit, or at least trying to get away from the unsatisfactory situation.

The general theory is that job dissatisfaction builds over time and is eventually strong enough to motivate employees to search for better work opportunities elsewhere.

This is likely true to some extent, but the most recent opinion is that specific 'shock events' quickly energize employees to think about and engage in exit behavior.

For example, the emotion reaction you experience to an unfair management decision or a conflict episode with a co-worker motivates you to look at job ads and speak to friends about job opportunities where they work.

[5] Voice refers to any attempt to change, rather than escape from, the dissatisfying situation.

Voice can be constructive response, such as recommending ways for management to improve the situation, or it can be more confrontational, such as by filing formal grievances.

In the extreme, some employees might engage in counterproductive behaviors to get attention and force changes in the organization.

According to A. O. Hirschman, the author of Exit, Voice, and Loyalty, the loyalty of a member to the organization he belongs to is higher when the entrance costs (physical, moral, material, or cognitive) are higher.

Neglect includes reducing work efforts, paying less attention to quality, and increasing absenteeism and lateness.