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Smart contracts and transaction costs

Author

Listed:
  • 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. Williamson, Oliver, 2009. "The Theory of the Firm as Governance Structure: From Choice to Contract," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 6, pages 111-134, December.
    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.
    4. Williamson, Oliver E, 1973. "Markets and Hierarchies: Some Elementary Considerations," American Economic Review, American Economic Association, vol. 63(2), pages 316-325, May.
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    6. Gibbons, Robert, 2005. "Four forma(lizable) theories of the firm?," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 200-245, October.
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    8. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
    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.
    10. Richard T. Holden & Anup Malani, 2019. "Can Blockchain Solve the Hold-up Problem in Contracts?," NBER Working Papers 25833, National Bureau of Economic Research, Inc.
    11. repec:cup:jinsec:v:14:y:2018:i:04:p:639-658_00 is not listed on IDEAS
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    Cited by:

    1. 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.

    More about this item

    Keywords

    Blockchain; Smart contracts; Incomplete contracts; Transaction costs; Adaptation;

    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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