Organizational politics and complexity: Coase vs. Arrow, March, and Simon

2019 ◽  
Vol 29 (1) ◽  
pp. 95-104
Author(s):  
Luigi Marengo
Keyword(s):  
Transaction Costs ◽  
Transaction Cost ◽  
Organizational Politics ◽  
Organizational Conflict ◽  
Economic Activities ◽  
Cost Approach

Abstract This article argues that the transaction cost approach to the problem of organizing economic activities is undermined by a neglect of the consequences of the complexity of the interconnections among such activities and, in particular, of the complexity generated by conflict and divergent interests of the agents involved. With the increase of conflict, organizational equilibria cease to exist. Thus hierarchy is, in principle, not necessarily an efficiency increasing remedy to the existence of transaction costs but can be explained also as a way to provide temporary equilibria in the everlasting organizational conflict.

The tragedy of the private: transaction cost considerations

2014 ◽  
Vol 41 (6) ◽  
pp. 482-492
Author(s):  
Tamara Peneva Todorova
Keyword(s):  
Transaction Costs ◽  
Transaction Cost ◽  
Market Failure ◽  
Private Property ◽  
Market Uncertainty ◽  
Economic Activities ◽  
Content Type ◽  
Public Property ◽  
High Transaction Cost ◽  
High Degree

Purpose – The purpose of this paper is to weigh the benefits and costs of public property, as opposed to private, from the transaction cost perspective. In the absence of transaction costs, private property has clear advantages over public. However, when the true costs of running an economic system are taken into account, the advantages of private property are not so evident and public property may turn out to be the preferred form of ownership. The paper shows that in high-transaction cost sectors and economies such as the newly emerging markets in Eastern Europe, public property is a cheaper way of organizing economic activities, as it can save on transaction costs. The paper demonstrates these virtues of public ownership in relation to market failure, the provision of public goods, natural monopolies and competitive industries with a high degree of market uncertainty, opportunism and asset specificity. Design/methodology/approach – A qualitative paper discussing the advantages of public over private property in the presence of high-transaction costs. Findings – Studying different types of market failure the paper finds that public property is advantageous to private in high-transaction cost systems. Originality/value – Since most of the standard literature emphasizes the advantages of private property, the paper gives an economic explanation to those of public property taking on a new institutional approach and conducting a transaction cost analysis.

ICT Policy for Agriculture Based on a Transaction Cost Approach

2013 ◽  
pp. 323-337 ◽  
Author(s):  
Harsha de Silva ◽  
Dimuthu Ratnadiwakara
Keyword(s):  
Sri Lanka ◽  
Transaction Costs ◽  
Transaction Cost ◽  
Subsistence Agriculture ◽  
Subsistence Farming ◽  
Market Information ◽  
Cost Approach ◽  
Market Needs ◽  
Ict Revolution ◽  
Ict Policy

In Sri Lanka, the majority of farmers are generally poor,and rely on subsistence agriculture. If these farmers can even partially be made responsive to market needs, as opposed to current household needs, they could cultivate at least some income generating crops, which if sustained, can reduce their poverty. However, high transaction costs associated with obtaining market information have continued to keep poor farmers entrenched in subsistence farming. The current ICT revolution is making previously costly market information much more affordable to these farmers. Therefore, if used appropriately, ICT can help reduce the high transaction costs associated with market information thereby helping farmers move toward some level of commercialization. The question is how a country can achieve this objective. This paper considers the case of Sri Lanka and provides lessons, both positive and negative, for African policymakers.

ICT Policy for Agriculture Based on a Transaction Cost Approach

2010 ◽  
Vol 1 (1) ◽  
pp. 51-64 ◽  
Author(s):  
Harsha de Silva ◽  
Dimuthu Ratnadiwakara
Keyword(s):  
Sri Lanka ◽  
Transaction Costs ◽  
Transaction Cost ◽  
Subsistence Agriculture ◽  
Subsistence Farming ◽  
Market Information ◽  
Cost Approach ◽  
Market Needs ◽  
Ict Revolution ◽  
Ict Policy

In Sri Lanka, the majority of farmers are generally poor,and rely on subsistence agriculture. If these farmers can even partially be made responsive to market needs, as opposed to current household needs, they could cultivate at least some income generating crops, which if sustained, can reduce their poverty. However, high transaction costs associated with obtaining market information have continued to keep poor farmers entrenched in subsistence farming. The current ICT revolution is making previously costly market information much more affordable to these farmers. Therefore, if used appropriately, ICT can help reduce the high transaction costs associated with market information thereby helping farmers move toward some level of commercialization. The question is how can a country achieve this objective. This paper considers the case of Sri Lanka and provides lessons, both positive and negative, for African policymakers.

Information Technology, Transaction Costs and Governance Structures: Integrating an Institutional Approach

2007 ◽  
Vol 22 (3) ◽  
pp. 275-283 ◽  
Author(s):  
Mehmet Islamoglu ◽  
Jonathan Liebenau
Keyword(s):  
Information Technology ◽  
Information Systems ◽  
Transaction Costs ◽  
Transaction Cost ◽  
Institutional Environment ◽  
Governance Structure ◽  
Cost Approach ◽  
Institutional Approach ◽  
Behavioral Attributes ◽  
The Impact

Transaction cost concepts have been deployed in information systems to analyze the impact of information technology on the organization of economic activity in markets and hierarchies. It has been widely observed that there is a general trend toward markets. It has also been observed that the transaction cost approach cannot explain empirical observations where the choice of governance has more to do with power and behavioral attributes of transacting actors than with minimizing transaction costs. Information systems researchers have overcome the shortcomings of the transaction cost approach to a limited extent by complementing it with political economy, resource-dependency and network theories. However, these complementary perspectives cannot easily analyze the interactions between power and efficiency and cannot handle the impact of the institutional environment on the choice of governance structure. This research exposes the shortcomings of these complementary perspectives in the light of a range of institutionalist studies drawn from economics, sociology and anthropology. The research points out that an institutional approach is essential for understanding and overcoming the complications that may arise as IT-enabled moves toward markets are launched in organizations that are situated in institutional environments that are at present not compatible with market-oriented exchange arrangements. We demonstrate this by the application of three ‘tools’ to an exemplary case where information systems in the British National Health Service were intended as a tool to move one aspect of the hierarchical structure toward a market structure.

From transaction costs to transaction value: Overcoming the frictional paradigm

2020 ◽  
pp. 51-81
Author(s):  
D. P. Frolov
Keyword(s):  
Transaction Costs ◽  
Transaction Cost ◽  
Path Dependence ◽  
Transaction Cost Economics ◽  
Cost Minimization ◽  
Low Cost ◽  
Coase Theorem ◽  
Transactional Analysis ◽  
Transaction Sector ◽  
Transaction Value

The transaction cost economics has accumulated a mass of dogmatic concepts and assertions that have acquired high stability under the influence of path dependence. These include the dogma about transaction costs as frictions, the dogma about the unproductiveness of transactions as a generator of losses, “Stigler—Coase” theorem and the logic of transaction cost minimization, and also the dogma about the priority of institutions providing low-cost transactions. The listed dogmas underlie the prevailing tradition of transactional analysis the frictional paradigm — which, in turn, is the foundation of neo-institutional theory. Therefore, the community of new institutionalists implicitly blocks attempts of a serious revision of this dogmatics. The purpose of the article is to substantiate a post-institutional (alternative to the dominant neo-institutional discourse) value-oriented perspective for the development of transactional studies based on rethinking and combining forgotten theoretical alternatives. Those are Commons’s theory of transactions, Wallis—North’s theory of transaction sector, theory of transaction benefits (T. Sandler, N. Komesar, T. Eggertsson) and Zajac—Olsen’s theory of transaction value. The article provides arguments and examples in favor of broader explanatory possibilities of value-oriented transactional analysis.

scholarly journals Share Contract Revisited: A New Transaction Cost Approach

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Jian Ding ◽  
Yixiao Zhou
Keyword(s):  
Hong Kong ◽  
Transaction Cost ◽  
Empirical Studies ◽  
Theoretical Explanation ◽  
Empirical Testing ◽  
Cost Approach ◽  
Satisfactory Answer ◽  
The Impact

Abstract The purpose of this paper is to explore how sharecropping contracts are chosen over fixed-rent contracts. There are two concerning issues. First, theoretical explanation has been criticized for not providing a satisfactory answer to the question as to why share contracts are chosen. Second, among the existing empirical studies, there are great controversies about the impact of variance of output. Inspired by the latest insights from (Cheung, S. N. S. 2014. Economic Explanation. Hong Kong: Arcadia Press.), this paper not only provides an explanation for the choice of share contract that is suitable for empirical testing, but also solves the puzzle over variance of output.

On a Fallacy in the Coase Theorem and the Theorem of Transaction Costs Substitution

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Steven N. S. Cheung
Keyword(s):  
Transaction Costs ◽  
Transaction Cost ◽  
Coase Theorem ◽  
Economic Institutions ◽  
General Version ◽  
Historical Account ◽  
Rent Dissipation

AbstractThis paper first presents a historical account of the origin of the Coase Theorem. It then elaborates its significance in explaining the working of economic institutions. After expounding the concepts of transaction cost and rent dissipation, it points out an error in the Coase Theorem. Lastly, the paper propounds the Theorem of Transaction Costs Substitution as an extended and general version of the Coase Theorem.

scholarly journals Firms' Choice of Regulatory Instruments to Reduce Pollution: A Transaction Cost Approach

2004 ◽  
Vol 6 (3) ◽  
pp. 1-20 ◽  
Author(s):  
Magali Delmas ◽  
Alfred Marcus
Keyword(s):  
Transaction Costs ◽  
Transaction Cost ◽  
Transaction Cost Economics ◽  
Command And Control ◽  
Governance Structure ◽  
Governance Structures ◽  
Negotiated Agreements ◽  
Regulatory Instruments ◽  
Market Opportunities ◽  
And Control

This paper compares the economic efficiency of firm-agency governance structures for pollution reduction using transaction costs economics. Two governance structures are analyzed with the transaction costs approach: command and control regulation (CCR) and negotiated agreements (NAs). We propose that the choice of governance structure depends on the strategies firms pursue given the attributes of their transactions and their market opportunities. The application of transaction cost economics analysis leads to different choices of regulatory instruments. Firms in more mature, stable industries are likely to choose command and control, while firms in new, dynamic sectors are more likely to opt for negotiated agreements. Frequency of transactions is a key factor in firm choice.

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