Transaction Costs and Institutions: Investments in Exchange

Charles Nolan and Alex Trew

The B.E. Journal of Theoretical Economics, 2015, vol. 15, issue 2, 391-432

Abstract: This paper proposes a simple model for understanding transaction costs – their composition, size and policy implications. We distinguish between investments in institutions that facilitate exchange and the cost of conducting exchange itself. Institutional quality and market size are determined by the decisions of risk adverse agents and conditions are discussed under which the efficient allocation may be decentralized. We highlight a number of differences with models where transaction costs are exogenous, including the implications for taxation and measurement issues.

Keywords: exchange costs; transaction costs; general equilibrium; institutions (search for similar items in EconPapers)
JEL-codes: D02 D51 H20 L14 (search for similar items in EconPapers)
Date: 2015
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Related works:
Working Paper: Transaction Costs and Institutions: Investments in Exchanger (2015)
Working Paper: Transaction Costs and Institutions: Investments in Exchange (2015)
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DOI: 10.1515/bejte-2013-0090

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