Title: Transaction Cost Economics and Contractual Choice: Theory and Evidence* *The authors gratefully acknowledge the useful comments of Lee Alston, David Feeny, Bruce Herrick, Timur Kuran, Mustapha Nabli, Keijiro Otsuka, Jean-Philippe Platteau, Murray Wolfson and numerous participants of the University of Warwick's Seminar in Economic Development held in July 1986 on earlier versions of this paper.
Abstract: Publisher Summary This chapter presents the analysis of organizational form and contracts and focuses on a unifying transaction cost framework for explaining choices among different forms of contract. Most applications to the explanation of contractual choices have been concerned with a rather narrow range of contractual choices and have focused almost exclusively on agriculture and labor-shirking as the single form of opportunistic behavior to which contracts may be vulnerable. The nonagricultural experience reveals the importance of the largely neglected asset-misuse form of opportunistic behavior. The chapter explains the origin and consequences of contracting and the important and interrelated roles of opportunistic behavior and transaction and information costs. The chapter further illustrates the use of the transaction cost approach to contractual choices in a variety of sectors. The adherence to contracts and the efficiency of performance can be affected by perceptions about the fairness and legitimacy of contractual arrangements. These factors can be affected by ideology; therefore, ideology can also play an important role in reducing transaction costs.
Publication Year: 1989
Publication Date: 1989-01-01
Language: en
Type: book-chapter
Indexed In: ['crossref']
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Cited By Count: 20
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