Corporate downsizing to rebuild team spirit: How costly voting can foster cooperation

We propose a new mechanism to achieve coordination through voting, for which we discuss a number of real-life applications. Among them, the mechanism provides for a new theory for downsizing in organizations. A crisis may lead to a decrease in the willingness to cooperate in an organization, and therefore to a bad equilibrium. A consensual downsizing episode may signal credibly that survivors are willing to cooperate, and thus, it may be optimal and efficiency-enhancing (for the individuals remaining in the organization), as the empirical evidence suggests. A variation of the same mechanism leads to "efficient" upsizing. © 2007 by the European Economic Association.