Transaction Cost Economics and Plausible Actors: A Cognitive Reappraisal

This article discusses the cognitive plausibility of actors or agents within transaction cost economics (TCE). Our main thesis is that, although the actors within TCE are not based on cognitive functions, a simulation model can be built in which the cognition of the actors is accounted for. In this article we want to discuss four things. In the first place we describe TCE and its actors in which we especially analyze actor characteristics, such as trust, opportunism, bounded rationality, loyalty and learning. We conclude that these actor characteristics lack cognitive psychological plausibility. In the second place we give an overview of kinds of actors, which make it possible to discern the actor model TCE is using from other actor models. We make a distinction in actors as response function systems, as representational systems and as representational response function systems. In the third place we indicate that for a theory such as TCE in which complex actors and governance structures are studied, at least two levels of description can be determined: an intentional and an functional level. Within TCE trust, opportunism and loyalty of actors are described at an intentional level, without any reference to the underlying actor mechanisms which are in terms of functional descriptions. In order to complement TCE actors have to be made more cognitively plausible. In the fourth place we give an outline of an architecture for cognition the ACT-R approach that will be used to implement in an actor mechanisms of trust, loyalty, opportunism and learning. This article ends with a conceptual structure of a TCE-COG actor that can be used in a simulation to put TCE to a better test. The real implementation of ACT-R actors in a TCE simulation is part of ongoing research. 1. We would like to thank Martin Helmhout and Diederik Kraaijkamp for comments on earlier drafts.