Private Transaction Costs Research Articles

Lost in transaction?: An institutional analysis of households’ transaction costs from demand-side grid management

Better utilization of the electricity grid is urgently called for, and demand-side management (DSM) measures are implemented to influence consumers' electricity consumption to off-peak periods. Little is known about how DSM measures generate private transaction costs for households, being crucial for the effectiveness and fairness of such measures. This article contributes to the energy transition literature by exploring sources of private transaction costs for households from a time-of-use tariff scheme for the grid in Norway. Data from nine group interviews reveal that uncertainty about the transaction (grid capacity), distrust of the transactor (grid provider) and the complexity of the institutional context (uncertainty about the electricity sector) increase transaction costs for households and reduce effectiveness of the tariff. Providing households with information on the reasons and methods for adjusting electricity consumption is essential, including the economic impacts on households of the new tariff. Additionally, households should receive enhanced guidance of technology use and behavior changes. For these two steps to work, trust in energy actors must be strengthened. Lastly, one should pay attention to the potentially undermining effect of such DSM measures on legitimacy of energy policies in general, given the unequal levels of transaction costs depending on households’ capital.

A conceptual framework for measuring transaction costs in agri-environmental schemes: an application to the Dutch collective scheme

This research brings together insights from the literature on the measurement of transaction costs related to agri-environmental schemes (AES) and formulates a conceptual framework for measuring these transaction costs. The framework is then applied to the Dutch AES in which farmer collectives act as a mediator between farmer-members and the Dutch government. In particular, we study the distribution of private transaction costs in the collective scheme and compare this to the distribution under the former individual approach. Results show that transaction costs have increased substantially for the collective, while they decreased for public actors. Moreover, the execution of the Dutch AES depends for a large part on volunteers, whose costs are not accounted for in official records. Although the Dutch AES appears successful in terms of coordination, we conclude that it carries substantial transaction costs for the collectives and its dependency on volunteers makes it fragile in the long term.

Soukromé transakční náklady zadávání veřejných zakázek a faktory ovlivňující jejich výši

Public procurement is subject to very strict and detailed legal regulation, which generates significant transaction costs on the part of both the public and private sectors. This paper aims are to quantify the size of private transaction costs associated with participation in tenders and to identify the main factors that affect their value. The presented results are based on a survey containing 804 observations. The total value of the private transaction costs in 2012 is estimated at CZK 9 billion, which represents 1.8% of contracts value. Using regression model, we have identified factors that influence the size of transaction costs at the level of individual firms. These are relatively lower for larger contracts, supply contracts and also for more experienced companies. In contrast, higher values are found in smaller contracts, larger companies and companies that are more successful in tenders.

Private Transaction Costs of Water Trade in the Murray–Darling Basin

High transaction costs can prevent the efficient allocation of resources towards socially-desirable outcomes. Water is a classic example of a resource with private and public socially-desirable benefits, which depend on its efficient allocation. Public and private institutions thus fulfil an important function by seeking to lower transaction costs in water markets. Where transaction costs are reduced, those same institutions may benefit from positive economic outcomes. However, in spite of their importance for policy performance evaluation, very few studies have investigated the impacts of transaction costs over time on the success or failure of public policy implementation and compliance. This study identifies important transaction costs and their rate of change in the world's leading water market: the southern Murray–Darling Basin in Australia. It was found that some progress towards lowering transaction costs in water markets has been achieved, particularly in respect to water allocation (temporary) transfers. However, some water entitlement (permanent) transaction costs have increased in the time-period, which may be justifiable given the inherent complexities associated with individual entitlement transfer assessments. Overall, the analysis suggests that institutional investment in water markets have improved irrigator private gains from trade.

Private transaction costs of participation in water quality improvement programs for Australia's Great Barrier Reef: Extent, causes and policy implications

The direct private cost to landholders of participating in programs that result in improved farming activities (IFAs) is generally well understood. However, the private indirect or transaction costs, such as the cost of a landholder's time and the expense to learn about IFAs and apply for assistance to implement these changes on‐farm, are not so well understood. Where these have been studied, they have been shown to be extensive. We assess the extent and causes of private transaction costs incurred by sugarcane growers participating in the Australian Government's Reef Rescue scheme which pays farmers to adopt environmentally beneficial farm management practices. Utilising a mail‐out‐mail‐back survey of 110 growers, we found that the average total transaction cost per farm of participating in the program was AU$8389. The average total transaction costs per farm as a percentage of the average funding provided was 38 per cent. We also assessed which type of improved farming activity (soil, nutrient, pest or water management) generated the greatest transaction costs and how landholder characteristics such as bounded rationality, opportunism and social connection impacted on the extent of transaction costs.

An analytical framework for assessing the potential of intermediaries to improve the performance of payments for ecosystem services

The use of payments for ecosystem services (PES) to steer land use practices has increased considerably at an international level over past years. An efficient and effective PES implementation strategy often relies on active support from intermediaries. This paper provides an analytical framework for assessing the potential of intermediaries to improve the environmental effectiveness and cost-effectiveness of PES. Cost-effectiveness refers to transaction costs, whereas environmental effectiveness refers to ecological benefits provided. The framework assists in assessing how and for what activities of PES implementation intermediaries can improve performance based on the intermediaries’ institutional design. The analytical framework is based on institutional economics and applies mainly the theoretical underpinnings of transaction cost economics (TCE). This paper illustrates an example of the practical application of the framework by assessing the potential of German Landcare Associations (LCAs) to improve the performance of public PES programs. It is emphasized how key institutional design characteristics of LCAs can potentially influence (1) public and (2) private transaction costs as well as (3) participation in and (4) spatial targeting of governmental agri-environmental programs and schemes in Germany. The analytical framework is, however, not restricted to assessing the potential of intermediaries in the large public PES programs of industrialized countries. This paper discusses how the framework can be transferred to smaller private or larger supra-national PES programs and to the contexts of developing countries.

Measuring private transaction costs of public procurement: Case of the Czech Republic

In the Czech Republic ca. 13% of the GDP, is spent every year on public procurement. More money each year has to be spent by the contracting authorities and private subjects for the public procurement to even work. This paper focuses on measuring private transaction cost of public procurement in the Czech Republic. In the first section of this paper, we present data used for our analysis and methods used for achieving our goals. In the second section, we summarise the results. Average transaction cost of one proposal is CZK 22 489. Weighted average relative transaction cost is 0.25% of the contract value. We estimate the total transaction cost of public procurement in the Czech Republic to be almost six billion CZK, further we estimate possible cost reductions of these cost in the case of increased effectiveness to be between 500 million and CZK 1.84 billion. The market sector, contract prices, size of the firm and different types of contracting authorities have all a significant influence on the transaction cost. A comparison of our results to other empirical studies have been made and some interesting facts found out during research have been explained at the end of the second section.

Improving environmental decisions: A transaction-costs story

A multidisciplinary team of researchers made efforts to influence the design and implementation of environmental policy in Australia. A focus of these efforts was the development of the Investment Framework for Environmental Resources (INFFER). In addition, the team undertook a range of communication activities, training, user support, and participation in committees and enquiries. Transaction costs were relevant to these efforts in a variety of ways. Environmental managers perceived INFFER to involve relatively high transaction costs. A balance was struck between the system having simplicity (and low transaction costs) and delivering environmental benefits. Transaction costs were factored into the planning and prioritisation processes developed. For example, public and private transaction costs are accounted for in the calculation of benefit:cost ratios and in the choice of policy mechanisms. There are diverse roles that transaction costs play in the processes of developing, implementing and influencing environmental policy programmes. A key observation is that appropriate strategic investment in transaction costs can improve decisions and increase net benefits from an environmental programme. A well-designed decision process can involve incurring transaction costs at one stage in order to save transaction costs at a later stage.

Private transaction costs and environmental cross compliance in a crop region of Southwestern France

The 2003 review of the common agricultural policy (CAP) has introduced several new policy tools, among which is cross compliance. The introduction of this new policy entails production costs, along with other types of costs arising at the farm level: administrative, information and organisational costs, called transaction costs. The purpose of this paper is to determine the nature of transaction costs and to assess them. A survey conducted in 2006 among a sample of 39 farmers followed by a descriptive statistical analysis (multiple correspondence analysis, MCA) permits to associate farmer profiles with different levels of incurred transaction costs. These profiles reveal the impact which the farmers' responsibilities (professional networks) and the role of voluntary commitments previously undertaken may have on the nature and importance of transaction costs. This paper opens up new perspectives on the adoption criteria that should be taken into account in the evolution of agri-environmental regulations.

Measuring private transaction costs of European agri-environmental schemes

Recent changes in European agri-environmental policy allow farmers' transaction costs (TCs), also called private TCs, to be taken into account when calculating compensation payments for agri-environmental schemes (AESs). This gives rise to questions as to the significance of these costs and the methodologies used to measure them. In this paper, private TCs are measured and analysed using two methodologies: (1) through a survey of general perceptions of TCs and (2) through a one-year registration system for monitoring labour hours, operational and administrative costs and differences in revenue between a parcel of land in an AES and a comparable area of land not in a comparable scheme. The results obtained with both methodologies show that private TCs are significant and not to be underestimated. They represent about 15% of the total AES-related costs and about 25% of the compensation payment. The most important cost factor resulting from an AES-uptake is the income foregone which represents more than 50% of the total costs.

A Transactions Cost Theory of Patent Law

Patent law is under-theorized in the sense that the predominating incentive-based justifications cannot by themselves adequately explain empirical evidence on patenting gathered by research economists. This article provides an alternative justification for patent law based on private transaction costs savings offered by patent law in comparison to alternative options available to those who wish to exploit information assets. In particular, it identifies striking parallels to corporate law as described in recent scholarship and shows how patents act as affirmative asset partitions, ameliorate significant team production problems, and encourage technology transfer. Even if the patent system provides no significant incentives to invent, it can be explained and justified in terms of transaction costs savings alone.