SSE/EFI Working Paper Series in Economics and Finance
Transaction Cost, Institutions, and Evolution
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.
Keywords: Transaction costs; evolutionary game theory; social institutions; (follow links to similar papers)
JEL-Codes: C72; D23; D61; D81; (follow links to similar papers)
22 pages, April 1994
- This paper is published as:
Wärneryd, Karl, (1994), 'Transaction Cost, Institutions, and Evolution', Journal of Economic Behavior and Organization, Vol. 25, pages 219-239
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