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Transaction cost regulation

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  • Spiller, Pablo T.

Abstract

This paper discusses the fundamental underpinnings and some implications of transaction cost regulation (TCR), a framework to analyze the interaction between governments and investors fundamentally, but not exclusively, in utility industries. TCR sees regulation as the governance structure of these interactions, and thus, as in standard transaction cost economics, it places emphasis in understanding the nature of the hazards inherent to these interactions. The emphasis on transactional hazards requires a microanalytical perspective, where performance assessment is undertaken within the realm of possible institutional alternative. In that sense, politics becomes fundamental to understanding regulation as the governance of public/private interactions. The paper discusses two fundamental hazards and their organizational implications: governmental and third party opportunism. Both interact to make regulatory processes and outcomes more rigid, formalistic, and prone to conflict than envisioned by relational contracting.

Suggested Citation

  • Spiller, Pablo T., 2013. "Transaction cost regulation," Journal of Economic Behavior & Organization, Elsevier, vol. 89(C), pages 232-242.
    • Handle: RePEc:eee:jeborg:v:89:y:2013:i:c:p:232-242
    DOI: 10.1016/j.jebo.2012.03.002
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    More about this item

    Keywords

    Regulation; Opportunism; Transactions costs; Utilities; Third party opportunism;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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