A risk programming approach for analysing contractual choice in the presence of transaction costs

Abstract

A simple conceptual approach is developed that relates choice of utility-maximising contractual arrangements to transaction costs, transformation costs and risk associated with different arrangements. The approach provides a technique for incorporating transaction costs into risk programming models. A simple illustrative target MOTAD model is presented using hypothetical data, and changes in preferred contractual forms are examined as risk preferences, transaction costs and risks are varied