Stephen Bainbridge

law professor

Article about StarBucks includes links to various works on Transaction Cost. My day job is studying the legal rules that facilitate and define Governance relationships with the sub-set of economic institutions known as business associations. I decided a long time ago that economic analysis was the only way to make sense of those rules. A bit later I decided that I got the most bang for my analytical buck from Transaction Cost economics a.k.a. new institutional economics. Most of the time, if I work at it long enough, I can come up with a transaction cost story that explains the particular governance structure I'm studying (at least to my own satisfaction). I've done it for things like Insider Trading, participatory management, the existence of boards of directors, the business judgment rule, and Limited Liability.

The usual suspects when it comes to Transaction Cost-s include such things as search costs, uncertainty, complexity, bounded rationality, opportunism and shirking, collective action problems, bilateral monopolies, and, especially, asset specificity. When we observe differing governance structures, it is usually because the two institutions in question face differing transaction cost schedules in one of these areas.

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