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How to design institutional frameworks for markets. New institutional economics meet the needs of industrial organization

Author

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  • Éric Brousseau
  • Antonio Nicita

Abstract

The key role of institutions for economic performance has recently been acknowledged in the economic policy debate. This paper aims at pointing out the main policy lessons and the recommendations to be drawn from New Institutional Economics (NIE), when considering the organization of markets. We examine, first, the domains ? namely the establishment of property rights, the management of externalities and the maintenance of the competitive process ? on which NIE identifies the potential impact of institutional tools on market performance. Second, we highlight the tradeoffs identified in the literature regarding the organization of an institutional system. This leads us to consider the respective virtues and drawbacks of hierarchical vs. transactional, public vs. private, centralized vs. decentralized and formal vs. informal ordering. Finally, we conclude by showing how NIE draws attention to the difficulties faced by political or economic decision-makers when they attempt to enhance market efficiency by reforming institutional frameworks.

Suggested Citation

  • Éric Brousseau & Antonio Nicita, 2010. "How to design institutional frameworks for markets. New institutional economics meet the needs of industrial organization," Revue d'économie industrielle, De Boeck Université, vol. 0(1), pages 87-118.
    • Handle: RePEc:cai:reidbu:rei_129_0087
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    Citations

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    Cited by:

    1. Antonio Nicita, 2014. "The legacy of R. Coase (1910–2013): toward a theory of institutional 'moving equilibrium'?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 61(2), pages 93-108, June.
    2. Thomas Bolognesi, 2014. "The paradox of the modernisation of urban water systems in Europe: Intrinsic institutional limits for sustainability," Natural Resources Forum, Blackwell Publishing, vol. 38(4), pages 270-281, November.
    3. Thomas Bolognesi, 2013. "Modernisation of urban water services management in Europe and prospects for sustainability: an analysis in terms of institutional resource regimes," Working Papers halshs-01058059, HAL.

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