Neither market nor hierarchy—coordination costs in the allocation of track capacity in the Swedish railway network

Transaction costs have been an issue since the advent of the deregulation of the European railway markets in the 1990s. Transaction cost economics received renewed attention in research on the deregulated railway markets in the EU after the publications of two influential reports in the early 2010s. In this article, we develop a model that enables classification and measurement of transaction costs and other coordination costs in deregulated markets. This model is then used to analyze the costs of path allocation in the Swedish railway sector and to compare the results with findings in previous research. We also discuss the economic rationale of the distribution of coordination costs among the involved parties. Our key empirical findings are that the total coordination costs in the Swedish market-mimicking path allocation process are as low as or lower than the most cost-efficient market coordination processes studied in railway markets, and that the state administrations take on nearly all the coordination costs in order to minimize the effects of opportunism, rent-seeking and information impactedness. Another finding is that the size of the coordination costs found by different studies seems to be dependent on whether a bottom-up or a top-down approach is used.     

Testing for adjustment costs and regime shifts in BRENT crude futures market

This paper, using a threshold vector error-correction (TVECM) model, examines whether BRENT crude spot and futures oil prices are cointegrated. By employing this methodology we are able to evaluate the degree and dynamics of transaction costs resulting from various market imperfections. TVECM model is applied on daily spot and futures oil prices covering the period 1990-2009. The hypothesis we test is to what extent BRENT crude is indeed an integrated oil market in terms of threshold effects and adjustment costs. Our findings support that market follows a gradual integration path. We find that BRENT crude spot and futures are cointegrated, though two regimes are clearly identified. This implies that a threshold exists and it is indeed significant. Adjustment costs in the error correction are present, and they are valid at the typical regime that is the dominant, and as a result should not be ignored.     

An Endogenous Growth Model of a Financially Repressed Small Open Economy

The paper develops a monetary endogenous growth model of a financially repressed small open economy, characterized by curb markets, capital mobility, transaction costs in domestic and foreign capital markets, and a flexible exchange rate system, to analyze the impact of financial liberalization – interest rate deregulation and lower multiple reserve requirements – on growth and inflation. When the model is calibrated to match world figures, we find that interest rate deregulation enhances growth and reduces inflation in steady-state. For relatively smaller transaction costs in the curb market, the above result is, however, reversed. Under such circumstances, lowering the transaction costs in the foreign capital market tends to restore the growth-enhancing (inflation-reducing) capabilities of interest rate deregulation. Lower reserve requirements, though, always ensures lower (higher) steady-state inflation (growth).     

Index arbitrage and dynamics between REIT index futures and spot prices

This article contributes to the real estate literature by investigating the pricing relationship between REIT index futures and spot. Based on the cost-of-carry model, we first show that there exist three arbitrage regimes in Australia’s REIT spot-futures price dynamics. Further analysis indicates that the two thresholds, which separate the regimes, are largely consistent with the level dictated by transaction costs. We then estimate a threshold vector error correction model (TVECM). The results show that mean reversion of the mispricing error only takes place in the two outer regimes. Furthermore, we find evidence that REIT spot market is more informationally efficient than the futures market. Given its short history, it will take time for REIT index futures market to mature. Finally, we find that we can enhance hedging performance by accommodating the feature of threshold cointegration displayed by the data. As the futures-spot relationship differs across regimes, we can develop a hedging strategy by adjusting the hedge ratio based on arbitrage regimes. It leads to a greater variance reduction for the hedged portfolio than some conventional methods examined in the existing real estate literature.     

公共产品供给主体及边界确定的交易费用经济学分析——兼论我国公共产品供给过程中交易费用的计量

将新制度经济学中交易费用理论引入公共产品供给分析,给出了供给公共产品的主体确定的理论模型,并在威廉姆森范式扩展的基础上得出了各个主体的边界,认为最优公共产品供给方式的选择和主体边界的确定,取决于公共产品供给过程中发生的交易费用.测算了中国公私部门供给公共产品过程中存在的交易费用,发现就我国公共产品的供给而言,在一定的条件下将公共产品供给由政府部门交给私人部门与第三部门可以节约交易费用,提高公共产品供给的效率.     

Contractual distortions in a market with frictions

This paper analyses contract design in a decentralized market environment with frictions. While principals (e.g., firms) have all contractual power, their market power is constrained as agents (e.g., workers) can choose to wait and search for better offers. We find that results depend crucially on how market frictions affect agents’ utilities. With type-independent costs of search and waiting, equilibrium contracts are always first-best. If agents are impatient and discount future payoffs, however, distortions vanish only gradually. In the latter case, we also characterize equilibrium offers and show that the market exhibits two types of externalities, both of which are absent in the case of type-independent costs of search.     

Induced Institutional Innovation and Transaction Costs: The Case of the Australian National Native Title Tribunal

The theory of induced innovation says that technological innovations which economize on relatively scarce inputs will be invented and adopted. Hayami and Ruttan have hypothesized that this model also holds for institutional innovations. Coase and Williamson suggest that economic organization, such as vertical integration, is the result of transaction cost minimization. Coase discusses the transaction costs of negotiation versus other alternatives for solving externality problems. This paper brings these previously unconnected threads of the literature together and incorporates transaction costs in an induced institutional innovation model.

This conceptual model is brought to bear on the issue of institutional innovations over time in relation to the National Native Title Tribunal. In addition to the reductions in transaction costs from a negotiated settlement rather than litigation, there are other advantages of negotiation. These may include improved “quality” of settlements, improved relations between the negotiating parties, and more timely resolution.     

Testing for Regime Changes in Greek Sovereign Debt Crisis

This paper examines whether the efficiency market hypothesis for the Greek sovereign debt holds. As in Blanco et al. (2005) we test the theoretical equivalence of credit default swap (CDS) and spreads that dictates a CI relationship between the two. The main innovation of the present analysis is the use of a threshold vector error-correction (TVECM) model, thus allowing thresholds within the sample covering the period 1990 to 2010. Moreover, by employing this methodology we are able to evaluate the degree and dynamics of transaction costs resulting from various events due to external market imperfections but also domestic factors. The main hypothesis we test is to what extent spreads and CDS are indeed integrated that may result in an efficient and integrated segniorage capital market. Our findings support the gradual integration hypothesis. We find that spreads and CDS are cointegrated, though threshold effects are also revealed in terms of events that have impacted on markets.     

Transaction costs and informational cascades in financial markets

We study the effect of transaction costs (e.g., a trading fee or a transaction tax, like the Tobin tax) on the aggregation of private information in financial markets. We implement a financial market with sequential trading and transaction costs in the laboratory. According to theory, eventually all traders neglect their private information and abstain from trading (i.e., a no-trade informational cascade occurs). We find that, in the experiment, informational no-trade cascades occur when theory predicts they should (i.e., when the trade imbalance is sufficiently high). At the same time, the proportion of subjects irrationally trading against their private information is smaller than in a financial market without transaction costs. As a result, the overall efficiency of the market is not significantly affected by the presence of transaction costs.     

A transaction cost model of contract choice: The case of petroleum exploration

The growing literature on transaction costs posits that the structures of contracts involving exchange under uncertainty are influenced by the costs incurred by the contracting parties prior to, as well as after, a contract is signed. This research investigates the contractual responses to the substantial uncertainty attending the exchange of rights to underground petroleum deposits. It develops a transaction cost model to explain the payment structure found in these contracts. The model identifies the major transaction costs associated with the payment types used in oil and gas exploration contracts, including ex ante measurement costs and ex post production inefficiencies, and explains their effect on contract structure. Testable implications concerning variations in the payment structure of petroleum exploration contracts are generated and tested using data from private oil and gas mineral rights leasing contracts in four western states. The study has direct public policy significance in that it delineates the implications of different payment structures of oil and gas leasing contracts. These implications can be used to evaluate proposals to reform federal oil and gas leasing policies. In addition, while there has been considerable analysis of federal offshore oil and gas leasing contracts, there has been a dearth of research on private onshore oil leasing practices. This study helps to fill this empirical void.     

Transaction costs as determinants of opportunism in integrated and independent sales forces

This study is an empirical test of the transaction cost determinants of opportunism by salespeople who sell electronic components in 169 U.S. sales districts. Opportunism by salespeople, as reported by their supervisors, is modeled as a function of (i) whether the salesperson is an employee or a manufacturers' representative; (ii) characteristics of the sales environment central to transaction cost analysis. The results generally support the transaction cost framework. They indicate that an especially powerful way to combat opportunism is to induce salespeople to perceive high goal congruence, i.e., that what benefits the company benefits them.     

信任、交易成本与商业信用模式

本文研究信任这一非正式制度对企业交易成本和商业信用模式的影响。以我国各省的信任调查数据为研究基础,本文发现地区间信任差异将导致企业的签约形式显著不同,商业信用模式存在较大差异。地区间信任度越低,该地区企业的签约成本越高,具体表现为:企业较多地采用预付账款和应付票据等成本较高的商业信用模式,且相应的销售费用和折扣支出也越多。与以往文献关注法律等正式制度安排的差异不同,本文不仅验证了转轨经济环境下信任等非正式制度的重要性,同时还为"地区"与"个体"间信任的传递特征提供了经验证据,这有助于深入理解我国现阶段企业交易行为和"地区"与"个体"间的信任关系。     

Reforming the local public sector: economics and politics in privatization of water and solid waste

Several empirical studies have analyzed the factors that influence local privatization. We examine the influence of transaction costs and political factors on local governments’ choices through new variables. We consider two relevant services accounting for different amounts of transaction costs: water and solid waste delivery. Our results show that privatization is less common for water, which has higher transaction costs. Furthermore, we find that municipalities with a conservative ruling party privatize more often regardless of the ideological orientation of the constituency. Finally, we find that intermunicipal cooperation may be a suitable organizational form for some municipalities.     

Unforeseen Contingencies and Incomplete Contracts

We scrutinize the conceptual framework commonly used in the incomplete contract literature. This literature usually assumes that contractual incompleteness is due to the transaction costs of describing—or of even foreseeing—the possible states of nature in advance. We argue, however, that such transaction costs need not interfere with optimal contracting ( i.e. transaction costs need not be relevant ), provided that agents can probabilistically forecast their possible future payoffs (even if other aspects of the state of the nature cannot be forecast). In other words, all that is required for optimality is that agents be able to perform dynamic programming, an assumption always invoked by the incomplete contract literature. The foregoing optimality result holds very generally provided that parties can commit themselves not to renegotiate. Moreover, we point out that renegotiation may be hard to reconcile with a framework that otherwise presumes perfect rationality. However, even if renegotiation is allowed, the result still remains valid provided that parties are risk averse.     

金融制度效率:交易费用经济学的诠释

在阿罗-德布鲁模型中,银行与证券市场是等价的。然而,现实中却存在银行与证券市场两种不同的金融制度。交易费用经济学对此的解释是正的交易费用现实及交易费用结构。两种金融制度效率的高低取决于金融功能发挥其作用所需的交易成本大小。各个国家之所以出现不同的金融制度结构,关键在于各国降低交易费用所依赖的路径不同。     

The Economic Efficiency of Policy Reform and Partial Market Liberalization under Transaction Costs

The article presents an integrated analysis of the effects of domestic and trade policy reform on resource allocation and welfare under transaction costs. It develops a general multiagent, multicommodity model, where transaction costs are the costs of resources used in the exchange process. The influence of domestic and trade policy (including both price and quantity instruments) on distorted market equilibrium is analysed. Alternative concepts of distorted equilibrium are presented and investigated. They provide a basis for evaluating the effects of multilateral partial market liberalization on resource allocation and welfare under transaction costs. New conditions are derived under which multilateral policy reforms generate Pareto improvements.     

Dual distribution as a vertical control device

This article posits transaction costs as the reason manufacturers use dual distribution (i.e., sell to customers through both independent and company- owned distributions). The authors base their analysis on Williamson's four types of transaction costs, and identify eight explanations for dual distributions. These reasons are lifecycle considerations, lack of distributor competition, information costs, facilitation of collusion, manufacturer opportunism, price discrimination, customer service and manufacturer efficiencies. They conclude that the competitive effect of dual distribution depends on which of the above explanations is relevant. If more than one explanation is valid, it may be necessary to balance the competitive effects in both the manufacturing and retail markets to evaluate the practice.     

GENERAL EQUILIBRIUM ANALYSIS OF HOLD‐UP PROBLEM AND NON‐EXCLUSIVE FRANCHISE CONTRACT

In this paper, we develop a general equilibrium model that examines the emergence of non‐exclusive franchise contracts in the presence of the franchisor hold‐up problem. Our model of an endogenous franchising network underscores the trade‐off between the cost associated with specifying and enforcing the contractual terms and the cost associated with broadening the relationships with multiple franchisors. We show that when the contracting cost relative to the relational cost is high and when the economies of specialization is low, a non‐exclusive franchise contract is an optimal contractual arrangement to mitigate franchisor opportunism.     

On the Transaction Cost Determinants of Vertical Integration

The transaction cost approach to the organization of firms hasbeen among the most significant advances in industrial organizationin the last 25 years. Much of this work has taken the transactioncost economics view of Williamson (1975, 1979, 1985) and Klein,Crawford, and Alchian (1978) in which high levels of quasi-rentsare taken to increase the likelihood of vertical integration.More recently, however, the more formal property rights theoryof Grossman and Hart (1986) and Hart and Moore (1990) has receivedconsiderable attention as a theory of integration. This articleexplores the predictions of property rights theory to assesswhat the extensive supporting evidence on transaction cost economicstells us about the property rights theory's empirical relevance.The article concludes that this evidence sheds little lighton the relevance of the property rights theory and discusseshow we might try to learn more.