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Transaction Cost Regulation

  • Pablo T. Spiller

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16735.

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Date of creation: Jan 2011
Date of revision:
Publication status: published as Spiller, Pablo T., 2013. "Transaction cost regulation," Journal of Economic Behavior & Organization, Elsevier, vol. 89(C), pages 232-242.
Handle: RePEc:nbr:nberwo:16735
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  4. de Figueiredo, Rui J P, Jr & Spiller, Pablo T & Urbiztondo, Santiago, 1999. "An Informational Perspective on Administrative Procedures," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 283-305, April.
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  9. Williamson, Oliver E, 1988. "The Logic of Economic Organization," Journal of Law, Economics and Organization, Oxford University Press, vol. 4(1), pages 65-93, Spring.
  10. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
  11. Cubbin, J. & Stern, J., 2004. "Regulatory effectiveness: the impact of good regulatory governance on electricity industry capacity and efficiency in developing countries," Working Papers 04/04, Department of Economics, City University London.
  12. Sam Peltzman, 1976. "Toward a More General Theory of Regulation," NBER Working Papers 0133, National Bureau of Economic Research, Inc.
  13. Ernesto Dal Bo & Rafael Di Tella, 2003. "Capture by Threat," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1123-1152, October.
  14. Oliver E. Williamson, 1976. "Franchise Bidding for Natural Monopolies -- in General and with Respect to CATV," Bell Journal of Economics, The RAND Corporation, vol. 7(1), pages 73-104, Spring.
  15. Joel S. Demski & David E.M. Sappington, 1987. "Hierarchical Regulatory Control," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 369-383, Autumn.
  16. Witold J. Henisz, 2002. "The institutional environment for infrastructure investment," Industrial and Corporate Change, Oxford University Press, vol. 11(2), pages 355-389.
  17. McCubbins, Mathew D & Noll, Roger G & Weingast, Barry R, 1987. "Administrative Procedures as Instruments of Political Control," Journal of Law, Economics and Organization, Oxford University Press, vol. 3(2), pages 243-77, Fall.
  18. Levy, Brian & Spiller, Pablo T, 1994. "The Institutional Foundations of Regulatory Commitment: A Comparative Analysis of Telecommunications Regulation," Journal of Law, Economics and Organization, Oxford University Press, vol. 10(2), pages 201-46, October.
  19. Pablo T. Spiller & Ingo Vogelsang, 1997. "The Institutional Foundations of Regulatory Commitment in the UK: The Case of Telecommunications," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 153(4), pages 607-, December.
  20. Williamson, Oliver E, 1999. "Public and Private Bureaucracies: A Transaction Cost Economics Perspective," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 306-42, April.
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  22. Richard A. Posner, 1971. "Taxation by Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 22-50, Spring.
  23. Dal Bo, Ernesto & Rossi, Martin A., 2007. "Corruption and inefficiency: Theory and evidence from electric utilities," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 939-962, June.
  24. Spiller, Pablo T, 1996. "Institutions and Commitment," Industrial and Corporate Change, Oxford University Press, vol. 5(2), pages 421-52.
  25. Scott E. Masten, 2011. "Public Utility Ownership in 19th-Century America: The "Aberrant" Case of Water," Journal of Law, Economics and Organization, Oxford University Press, vol. 27(3), pages 604-654.
  26. Loeb, Martin & Magat, Wesley A, 1979. "A Decentralized Method for Utility Regulation," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 399-404, October.
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