Variable Transaction Costs Research Articles

Analysis of Transaction Costs and Market Participation among Cassava Farmers in Osun State, Nigeria

This study examined the effects of transaction cost variables on market participation among cassava farmers in Osun State, Nigeria. This was with a view to providing insight into how transaction cost factors can be managed to ensure that cassava farmers in Osun State participate more in the market for the purpose of promoting cassava production and hence agricultural growth as well as reducing poverty among the rural community. Access to market information, non-farm work, road condition, credit availability, access to telecommunication facilities, personal transport, farm size, farming experience, price of cassava, market distance, transport cost, dependency ratio, as well as age were used as proxies for transaction costs. The study made use of primary data by administering copies of a well-structured questionnaire to 100 cassava farmers drawn from three local governments in the State. Data obtained were analysed descriptively using frequencies, tables, simple percentages as well as pie and bar charts. Data collected were also analysed by inferential statistical procedure using Logit regression model. Results of the logit regression showed that access to market information and farm size have significant positive effects on cassava farmers’ participation in the market (). Findings also revealed that cost of transportation and dependency ratio have weakly significant negative effects on the probability of cassava farmers participating in the market (). The study concluded that access to market information and farm size play significant positive roles in the participation of cassava farmers in the market. Thus, policies that are aimed at lowering transaction costs through the creation of an enabling environment in which farmers can easily access market information, cultivate more farmlands and incur low cost of transportation are recommended.

Numerical Approximation of Information-Based Model Equation for Bermudan Option with Variable Transaction Costs

Non-linear partial differential equations have been increasingly used to model the price of options in the realistic market setting when transaction costs arising in the hedging of portfolios are taken into account. This paper focuses on finding the numerical solution of the non-linear partial differential equation corresponding to a Bermudan call option price with variable transaction costs for an asset under the information-based framework. The finite difference method is implemented to approximate the option price and its Greeks. Numerical examples are presented and the option prices compared to the closed-form solution of the information-based model and the Black Scholes model with zero transaction costs. The results show that the approximated option prices correspond to the analytical solution of the information-based model but are slightly higher than the prices under Black-Scholes model. These findings validate the finite difference method as an efficient way of approximating the information-based non-linear partial differential equation.

BIAYA TRANSAKSI DAN PEMILIHAN SALURAN PEMASARAN KOPI ARABIKA GAYO: STUDI EMPIRIS DI PROVINSI ACEH

This study aims to analyze the effect of transaction costs on the selection of marketing channels by Gayo Arabica coffee farmers in the Central Aceh and Bener Meriah districts. This study uses a transaction cost economics approach (TCE) to explain the choice between cooperatives collectors and exporters' traders. Identification of transaction cost variables that affect marketing channel selection by farmers in Aceh Tengah and Bener Meriah districts using the probit model with E-Views 7.0 software. The results show that the transaction costs that affect the farmers’ decision in choosing marketing channels to collectors from cooperatives in Central Aceh Regency are the amount of time to seek price information and dummy access to prices and prices received by farmers. Meanwhile, in Bener Meriah Regency, transaction costs that affect farmers' decisions in choosing marketing channels to collectors from cooperatives are the price received by farmers, dummy access to credit to traders, and the length of payment from traders. This research has policy implications for improving Gayo Arabica coffee farmers' structure, behavior, performance, and welfare

Pricing Bermudan Option with Variable Transaction Costs under the Information-Based Model

The Bermudan option pricing problem with variable transaction costs is considered for a risky asset whose price process is derived under the information-based model. The price is formulated as the value function of an optimal stopping problem, which is the value function of a stochastic control problem given by a non-linear second order partial differential equation. The theory of viscosity solutions is applied to solve the stochastic control problem such that the value function is also the solution of the corresponding Bellman equation. Under some regularity assumptions, the existence and uniqueness of the solution of the pricing equation are derived by the application of the Perron method and Banach Fixed Point theorem.

The influence of transaction cost variables on e-buyer satisfaction and loyalty: An e-business-to-consumer retailer context

Orientation: Considering the shifts in online buyer behaviour in the past few years, e-buyer satisfaction and loyalty should be at the forefront of any business strategy.Motivation for the study: Despite the confluence of transaction cost economics (TCE) and marketing, which predominantly appeared in relationship marketing and international marketing studies, there is a scarcity specifically of studies of the convergence of online retailing and TCE.Research purpose: This study therefore advances the convergence of TCE and marketing research to describe the influence of online retail transaction cost variables (specifically, uncertainty and asset specificity) on e-buyer satisfaction and loyalty. In this study, uncertainty in the TCE is linked to online price and risk reduction, whilst asset specificity refers to special offers online.Research approach/design and method: A quantitative, descriptive research design was followed, and 355 responses from e-buyers were analysed through structural equation modelling.Main findings: The key findings of the study show that reducing uncertainty is the strongest predictor of e-buyer satisfaction and loyalty.Practical/managerial implications: This implies that online retailers need to focus on developing marketing and online retail strategies that, from an economic perspective, unambiguously communicate all terms and conditions of the costs involved and provide alternative, safe payment options.Contribution/value-add: These results further imply that TEC could be refined to ensure e-buyer satisfaction on loyalty from an online retail perspective and to focus on the role and relevance of uncertainty and asset specificity.

Transaction Cost of Sunflower Seed Production in Tanzania: Application of Transaction Cost Economics Theory

This paper analyses the effects of transaction costs of production of the sunflower seeds by small scale farmers in Tanzania. The study utilises cross-sectional farm household data collected from a randomly selected sample of 120 small scale farmers in two central regions of Singida and Tabora in Tanzania. The results showed that transaction cost variables associated with information search and negotiation had negative effect on total output of sunflower seed production while contractual enforcement cost had positive effect on sunflower production. The effects were however not supported statistically (at p<0.05). Transaction costs associated with inputs information, access to means of communication and transportation, had significant negative effects on sunflower seed production. We recommend that policies aimed at improving rural road infrastructure, market information systems, small scale asset accumulation, human capital and promotion of farmer association could reduce transaction costs and enhance sunflower production by small scale commercial farmers.

Pricing American call options using the Black–Scholes equation with a nonlinear volatility function

In this paper we analyze a nonlinear generalization of the Black-Scholes equation for pricing American style call option in which the volatility may depend on the underlying asset price and the Gamma of the option. We propose a novel method of pricing American style call options by means of transformation of the free boundary problem for a nonlinear Black-Scholes equation into the so-called Gamma variational inequality with the new variable depending on the Gamma of the option. We apply a modified projective successive over-relation method in order to construct an effective numerical scheme for discretization of the Gamma variational inequality. Finally, we present several computational examples for the nonlinear Black-Scholes equation for pricing American style call option under presence of variable transaction costs.

Joint Control of Emissions Permit Trading and Production Involving Fixed and Variable Transaction Costs

The use of permit markets to mitigate harmful emissions is on the rise. When participating in such a market, an emitting firm needs to acquire from it permits that cover emissions resulting from production. Thus, it has to simultaneously cope with fluctuating permit prices and random demand, and also juggle between the activities of permit trading and permit‐consuming production. We shed light on this complex dynamic control problem, while confronting difficulties brought on by fixed as well as variable transaction costs associated with permit trading. We exploit K‐convexity variants that are suitable for two‐dimensional control, and achieve the partial characterization of optimal control policies. When the selling of permits is prohibited, we prescribe an ( s, S)‐type permit purchasing policy. For the more general case involving two‐way trading, we find it optimal to carry out trading in a three‐interval fashion. Heuristics, including one based on the uncoupling of trading and production activities, are introduced. Their effectiveness has been illustrated in computational studies.

Outward foreign direct investment from Indian manufacturing firms - does transaction cost theory explains early choices?

The objective of the paper is to see whether transaction cost theory explains early choices of Indian multinationals, when outward foreign direct investment (OFDI) policy was still not liberal. This is done through three research questions: 1) what determines choosing between joint venture (JV) and wholly-owned subsidiary (WOS) for Indian manufacturing firms; 2) whether factors are different from the one for the developed country firms; 3) do they differ if investment is made in another developing country vis-a-vis a developed country setting. The analysis is carried out on a sample of 88 WOS and 162 JVs made by 142 firms. Results indicate that different transaction cost variables influenced entry choice in developed countries vis-a-vis developing countries.

«ЕФЕКТ ЧАСУ ДОБИ» ЯК АНОМАЛІЯ ГІПОТЕЗИ ЕФЕКТИВНОГО РИНКУ

One of the most critical arguments for the implementation of the efficient markets hypothesis is the presence of so-called «anomalies», that is, empirical evidence of abnormal Одним з найбільш критичних аргументів щодо виконання гіпотези ефективного ринку є наявність так званих «аномалій», тобто емпіричних доказів ненормальної поведінки цін на активи, які не узгоджуються з ринковою ефективністю. Більшість праць у цьому напрямі не враховують при дослідженні аномалій транзакційних витрат. Їх наявність впливає на той факт, що трейдери можуть не мати можливість отримати надприбуток. У цій роботі досліджується можливість отримання прибутку через реплікацію дій трейдерів в межах аномалії «ефекту часу доби». Аналіз цієї аномалії базується на діях торгового робота, який моделює дії трейдерів та враховує змінні транзакційні витрати (спреди). Результати роботи передбачають, що торгові стратегії, націлені на використання денних паттернів («ефектів часу доби») не генерують надприбутків. Більше того, не існує значної різниці між докризовим, кризовим та посткризовими періодами у цьому контексті.

Massively parallel processing of recursive multi-period portfolio models

A recursive portfolio decision system is extended with parallel processing capability monitored by the Genetic Hybrid Algorithm (GHA). Massively parallel portfolio efficiency testing is conducted using stochastic simulation. Genuine out-of-sample forecasts are generated for all titles in the universe using fast cutting-edge time series algorithms. The computation of dynamic optimal portfolio weights is done within an affine multi-period setting. The terminal wealth within the planning horizon forms a moving target as the system evolves through time and only current transactions are carried out. Fixed and variable transaction costs are recognized without increasing computational complexity. We show using a recursive multi-period portfolio framework (RMP) that robust grid search and stochastic simulation with thousands of parallel processors can be conducted to provide evidence on portfolio efficiency. The downside risk of the RMP-strategy is significantly lower than that of the corresponding buy-and-hold strategy. The upside potential of RMP is much better than that of buy-and-hold. The non-parametric test procedure is independent of the underlying model and hence completely general. The modular structure of the system allows new forecasting techniques and optimization formulations to be introduced and tested in future development efforts.

The Effect of Transaction Cost Variables between Parent and Collaboration Companies on Financial Performance in Industry of Shipbuilding and Offshore Plant : Mediator of Sustainable Cooperation

The Effect of Transaction Cost Variables between Parent and Collaboration Companies on Financial Performance in Industry of Shipbuilding and Offshore Plant : Mediator of Sustainable Cooperation

Accountable Care Organizations and Transaction Cost Economics.

Using a Transaction Cost Economics (TCE) approach, this paper explores which organizational forms Accountable Care Organizations (ACOs) may take. A critical question about form is the amount of vertical integration that an ACO may have, a topic central to TCE. We posit that contextual factors outside and inside an ACO will produce variable transaction costs (the non-production costs of care) such that the decision to integrate vertically will derive from a comparison of these external versus internal costs, assuming reasonably rational management abilities. External costs include those arising from environmental uncertainty and complexity, small numbers bargaining, asset specificity, frequency of exchanges, and information "impactedness." Internal costs include those arising from human resource activities including hiring and staffing, training, evaluating (i.e., disciplining, appraising, or promoting), and otherwise administering programs. At the extreme, these different costs may produce either total vertical integration or little to no vertical integration with most ACOs falling in between. This essay demonstrates how TCE can be applied to the ACO organization form issue, explains TCE, considers ACO activity from the TCE perspective, and reflects on research directions that may inform TCE and facilitate ACO development.

A Transaction Cost Framework in Supply Chain Relationships: A Social Capital Perspective

ABSTRACTFostering strong and collaborative buyer–supplier relationships is essential for enhancing supply chain performance. Therefore, buyers and suppliers both attempt to develop collaborative relationships. Sometimes these collaborative activities do not result in a happy ending, and consequently, are harmful in the form of opportunism on the part of the buyer or supplier. Opportunism has remained significant in buyer–supplier studies. However, there is a lack of research on opportunism, behavioral uncertainty, and relationship-specific investments from the perspective of social capital factors in an industrial marketing setting. The primary aim of the current study is to identify the role of social capital and transaction cost theory variables. This study integrates different research on transaction cost theory variables and also reviews the relationship of these variables to social capital factors. The current study includes 83 studies from various journal article databases such as Wiley-Blackwell, Emerald, SpringerLink, Taylor & Francis, JSTOR, and ScienceDirect. This review focuses on the most recent studies. This study identifies various perspectives regarding the effect of social capital on transaction cost variables. Conclusions and implications for managers are also discussed.

Analysis of the Nonlinear Option Pricing Model Under Variable Transaction Costs

In this paper we analyze a nonlinear Black–Scholes model for option pricing under variable transaction costs. The diffusion coefficient of the nonlinear parabolic equation for the price V is assumed to be a function of the underlying asset price and the Gamma of the option. We show that the generalizations of the classical Black–Scholes model can be analyzed by means of transformation of the fully nonlinear parabolic equation into a quasilinear parabolic equation for the second derivative of the option price. We show existence of a classical smooth solution and prove useful bounds on the option prices. Furthermore, we construct an effective numerical scheme for approximation of the solution. The solutions are obtained by means of the efficient numerical discretization scheme of the Gamma equation. Several computational examples are presented.

The Mediating Effect of Relationship Quality on the Transaction Cost–Export Performance Link: Bangladeshi Exporters' Perspectives

This study explores how relationship quality might mediate the link between transaction cost variables and export performance. In the proposed conceptual model, relationship-specific assets and uncertainty affect export performance both directly and through relationship quality; survey data from 185 exporting organizations in Bangladesh provide the test of this model. This article thus proposes that transaction cost economics and relational exchange theories are complementary rather than competing theories. These conclusions arise because this study accounts for not only the direct effect of asset specificity and uncertainty on export performance but also their indirect effects through relationship quality, which have not been empirically tested or clarified previously.

Intraday Anomalies and Market Efficiency: A Trading Robot Analysis

One of the leading criticisms of the efficient market hypothesis is the presence of so-called anomalies, i.e. empirical evidence of abnormal behaviour of asset prices which is inconsistent with market efficiency. However, most studies do not take into account transaction costs. Their existence implies that in fact traders might not be able to make abnormal profits. This paper examines whether or not anomalies such as intraday or time of the day effects give rise to exploitable profit opportunities by replicating the actions of traders. Specifically, the analysis is based on a trading robot which simulates their behaviour, and incorporates variable transaction costs (spreads). The results suggest that trading strategies aimed at exploiting daily patterns do not generate extra profits. Further, there are no significant differences between sub-periods (2005---2006--normal; 2007---2009--crisis; 2010---2011--post-crisis).

The Profits–Leverage Puzzle Revisited

Abstract The inverse relation between leverage and profitability is widely regarded as a serious defect of the trade-off theory. We show that the defect is not with the theory but with the use of a leverage ratio in which profitability affects both the numerator and the denominator. Profitability directly increases the value of equity. Firms do take the predicted offsetting actions. They issue debt and repurchase equity when profitability rises, and retire debt and issue equity when profitability falls. Consistent with variable transactions costs, the adjustment is not generally sufficient to fully undo the profitability shocks. Accordingly, on average the leverage ratio falls as profitability rises.

English

This study investigated farmer characteristics, private assets, public assets and transaction cost variables influencing the probability and intensity of participating in the market by smallholder maize farmers in the Upper West Region of Ghana. The Household Commercialisation Index was used to estimate the level of market participation and the Double Hurdle Model was used to estimate the factors influencing both market participation and intensity of participation. The results indicated that about twenty-four percent of maize is sold in the region within a production year which implies low commercialisation index. Specific farmer characteristics, private assets, public assets and transaction cost variables significantly influenced the probability and intensity of market participation behaviour in the region. The study concludes that maize is produced as a staple for household consumption. The study recommends that government through the Ministry of Food and Agriculture should institute productivity enhancing measures to increase the productivity of maize as well as establish rural finance schemes to address the credit needs of smallholders.   Key words: Household commercialisation index, double hurdle model, market participation, maize, smallholder farmers, upper west region, Ghana.

Intraday Anomalies and Market Efficiency: A Trading Robot Analysis

One of the leading criticisms of the Efficient Market Hypothesis (EMH) is the presence of so-called “anomalies”, i.e. empirical evidence of abnormal behaviour of asset prices which is inconsistent with market efficiency. However, most studies do not take into account transaction costs. Their existence implies that in fact traders might not be able to make abnormal profits. This paper examines whether or not anomalies such as intraday or time of the day effects give rise to exploitable profit opportunities by replicating the actions of traders. Specifically, the analysis is based on a trading robot which simulates their behaviour, and incorporates variable transaction costs (spreads). The results suggest that trading strategies aimed at exploiting daily patterns do not generate extra profits. Further, there are no significant differences between sub-periods (2005-2006 – “normal”, 2007-2009 – “crisis”, 2010-2011 – “post-crisis).