transaction cost economics (tce), as a subset of new institutional economics (nie), is the combination of economics, organization and law. noble prize in 2009 was dedicated to oliver williamson who was the most popular face in the economics as tce main contributor. in tce, the main issues on the one hand is how institutions follow characteristics of transactions, on the other hand, the making o...

This paper builds upon a view of economic organizations as problem-solving arrangements and presents a simple model of adaptive problem-solving driven by trial-and-error learning and collective selection. Institutional structures and, in particular, their degree of decentralization, determine which solutions are tried out and undergo selection. It is shown that if the design problem at hand is ...

Introducing concerns about land fertility for landlords in a Principal –Agent model of sharecropping with moral hazard, we show that the optimal contract under limited commitment reflects a trade-off between production and land quality maintenance. Using data from the Philippines, a model where the leasing out and contract choices are simultaneous is estimated and avoids the selectivity bias of...

When subjects can make non-binding announcements of possible contributions to a public good numerically, there is no effect on average level of contributions in a public goods experiment relative to play without announcements. But a detailed analysis of this experiment shows that pre-play announcements increased the variance of achieved cooperation among groups, leading both to more highly coop...

This paper concentrates on the question of organizational design under asymmetric information. The design of the organization has two parts: first, communication channels between the members should be established and second, the tasks should be allocated to the party that performs it in the most efficient way. We show that if the decisions are delegated to the agents, the agent’s decisions reve...

In this paper we explain the prevalence of explicit contracts of employment, particularly those that embody highrather than low-powered incentives and clauses that supersede the common law defaults. Our analysis is based on an understanding of two fundamental problems that arise when agency relationships are established between a worker and firm. The first is that agency relationships often req...

We analyze the bilateral trade of divisible goods in the presence of stochastic transaction costs. Mutual best-response conditions are applied to a model of optimal investment under uncertainty. The first-best solution involves a single transaction, but such behavior is not incentive compatible without courtenforceable contracts. We solve for a second-best policy in which some gains from trade ...

This working paper provides a summary on transaction cost economics (TCE) and recent developments thereof. After an introductory discussion of TCE’s role within the field of New Institutional Economics, a critical analysis of the contribution of the existing body of empirical literature is conducted. In recent years, researchers have continued to develop and extend TCE. Williamson (1991b) intro...