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The new institutional economics for hospitality and tourism

In: A Modern Guide to Tourism Economics

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  • Mehmet Altin

Abstract

The purpose of this chapter is to examine how transaction costs affect economic activity and how institutions play a role in them, as outlined in New Institutional Economics (NIE). The NIE was developed as a response to the neoclassical economic's unrealistic assumptions. Transaction costs arise from people's limited availability of information and mental capacity, uncertain futures, and uncertain outcomes. Institutions serve as "rules of the game" to reduce uncertainty, influence behavior and minimize transaction costs. An institution can either be formal, such as a set of rules or laws regulating society, or informal, such as a religion, culture, or tradition. The NIE examines transaction costs at the micro-level (buying and selling decisions) and the macro-level (economic growth and development).

Suggested Citation

  • Mehmet Altin, 2022. "The new institutional economics for hospitality and tourism," Chapters, in: Robertico Croes & Yang Yang (ed.), A Modern Guide to Tourism Economics, chapter 12, pages 202-219, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:20341_12
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