I analyze the evolution of organizations that allow free entry and exit of members, such as cities, trade unions, sports clubs and cooperatives. Current members choose a policy for the organization, but this, in turn, may lead to new agents joining or dissatisfied members leaving, yielding a new set of policymakers tomorrow. The resulting feedback effects may take the organization down a “slippery slope”, which agents may allow in equilibrium despite being forward-looking and patient, a result that contrasts with existing models of elite clubs. The model explains how quickly the organization approaches a steady state; how this limit depends on the distribution of agents’ preferences and the initial policy; and, in particular, when a population of mostly moderate agents might support extremist organizations. The model can also be extended to allow for competition between multiple organizations.
Dec. 4, 2018