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Coase and the Transaction Cost Approach to Regulation

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  • Moszoro, Marian
  • Spiller, Pablo

Abstract

Early economic research on natural monopoly regulation focused on market failure—pricing tariffs and externalities. While Coase’s multi-tariff marginal cost pricing became the standard, his approach to externality regulation as a contractual issue shifted the debate to transaction costs, but failed to recognize the associated political hazards. The renewed approach to regulation is more cognizant of the interplay of transaction costs and political hazards. In this paper, we show that regulatory rigidities arise as a response to political hazards of opportunistic expropriation and challenges from interested third parties to public agents.

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  • Moszoro, Marian & Spiller, Pablo, 2016. "Coase and the Transaction Cost Approach to Regulation," MPRA Paper 102726, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:102726
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    Cited by:

    1. Kenneth Button, 2020. "Studying the empirical implications of the liberalization of airport markets," Competition and Regulation in Network Industries, , vol. 21(3), pages 223-243, September.
    2. Jean Beuve & Marian W Moszoro & Pablo T Spiller, 2023. "Doing It by the Book: Political Contestability and Public Contract Renegotiations," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 39(1), pages 281-308.

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    More about this item

    Keywords

    Utilities; Regulation; Transaction Costs; Politics; Coase;
    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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