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Smart contracts and transaction costs

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  • Massimiliano Vatiero

Abstract

Because of the enforcement based on the blockchain technology, smart contracts are supposed to allow contracting parties to conduct transactions more efficiently than traditional contracts. This paper challenges that claim. Because of the need for an efficiency-enhancing adaptation of institutions—a chief problem of transaction cost economics-traditional contracts may incur lower transaction costs than smart contracts.

Suggested Citation

  • Massimiliano Vatiero, 2018. "Smart contracts and transaction costs," Discussion Papers 2018/238, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    • Handle: RePEc:pie:dsedps:2018/238
    Note: ISSN 2039-1854
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    File URL: https://www.ec.unipi.it/documents/Ricerca/papers/2018-238.pdf
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    References listed on IDEAS

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    1. Antonio Nicita & Massimiliano Vatiero, 2014. "Dixit versus Williamson: the ‘fundamental transformation’ reconsidered," European Journal of Law and Economics, Springer, vol. 37(3), pages 439-453, June.
    2. Peter G. Klein & Michael E. Sykuta (ed.), 2010. "The Elgar Companion to Transaction Cost Economics," Books, Edward Elgar Publishing, number 4136.
    3. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-261, October.
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    5. Claude Ménard & Mary M. Shirley (ed.), 2018. "A Research Agenda for New Institutional Economics," Books, Edward Elgar Publishing, number 17960.
    6. Gibbons, Robert, 2005. "Four forma(lizable) theories of the firm?," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 200-245, October.
    7. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
    8. David Yermack, 2017. "Corporate Governance and Blockchains," Review of Finance, European Finance Association, vol. 21(1), pages 7-31.
    9. Williamson, Oliver E, 1971. "The Vertical Integration of Production: Market Failure Considerations," American Economic Review, American Economic Association, vol. 61(2), pages 112-123, May.
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    11. Davidson, Sinclair & De Filippi, Primavera & Potts, Jason, 2018. "Blockchains and the economic institutions of capitalism," Journal of Institutional Economics, Cambridge University Press, vol. 14(4), pages 639-658, August.
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    Citations

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    Cited by:

    1. Plinio Limata, 2020. "Blockchain and Institutions (I): trust and (de)centralization," CERBE Working Papers wpC35, CERBE Center for Relationship Banking and Economics.
    2. Olivier Meier & Aurélie Sannajust, 2021. "The smart contract revolution: a solution for the holdup problem?," Small Business Economics, Springer, vol. 57(2), pages 1073-1088, August.
    3. Richard Baron & Magali Chaudey, 2019. "Blockchain and Smart-contract: a pioneering Approach of inter-firms Relationships? The case of franchise networks," Working Papers halshs-02111603, HAL.
    4. Plinio Limata, 2019. "Blockchains’ twilight zones. A reasoned literature review for a critical primer," Econometica Working Papers wp76, Econometica.
    5. Plinio Limata, 2020. "Blockchain and Institutions (II): The Realm of Law," CERBE Working Papers wpC36, CERBE Center for Relationship Banking and Economics.
    6. Olivier Meier & Aurélie Sannajust, 0. "The smart contract revolution: a solution for the holdup problem?," Small Business Economics, Springer, vol. 0, pages 1-16.

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    More about this item

    Keywords

    Blockchain; Smart contracts; Incomplete contracts; Transaction costs; Adaptation;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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