Transaction Cost Regulation

29 Pages Posted: 31 Jan 2011 Last revised: 25 Mar 2021

See all articles by Pablo T. Spiller

Pablo T. Spiller

University of California, Berkeley - Business & Public Policy Group

Date Written: January 2011

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., Transaction Cost Regulation (January 2011). NBER Working Paper No. w16735, Available at SSRN: https://ssrn.com/abstract=1749894

Pablo T. Spiller (Contact Author)

University of California, Berkeley - Business & Public Policy Group ( email )

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