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Transaction Cost, Institutions, and Evolution

Author

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  • Wärneryd, Karl

    () (Dept. of Economics, Stockholm School of Economics)

Abstract

We suggest an operational definition of transaction cost as the expected value of strategy information in games played by individuals randomly matched from a large population. We relate the concept of a transaction cost minimum to those of Nash equilibrium, efficiency, and evolutionary stability, and apply it in a simple model of the Coasean firm. In particular, we identify circumstances in which evolutionary dynamics will minimize transaction cost, which allows various informal hypotheses about the relation between institutional evolution and transaction cost to be addressed in a precise sense.

Suggested Citation

  • Wärneryd, Karl, 1994. "Transaction Cost, Institutions, and Evolution," SSE/EFI Working Paper Series in Economics and Finance 13, Stockholm School of Economics.
  • Handle: RePEc:hhs:hastef:0013
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    Cited by:

    1. H. Peyton Young, 2007. "Social Norms," Economics Series Working Papers 307, University of Oxford, Department of Economics.

    More about this item

    Keywords

    Transaction costs; evolutionary game theory; social institutions;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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