The Efficient Scope of Private Transactions-Cost-Reducing Institutions: The Successes and Failures of Commodity Exchanges

Stephen Craig Pirrong

The Journal of Legal Studies, 1995, vol. 24, issue 1, 229-55

Abstract: Commodity exchanges historically have served as private organizations that govern contractual relations between market participants. Their functions have included commodity measurement, contract enforcement, the policing of theft and fraud, and the mitigation of information asymmetries. In contrast to these successes, the Chicago Board of Trade failed signally in its attempt to introduce a grain grading system after the Civil War. This effort failed because (1) the proposed reform imposed significant costs on interests whose cooperation was essential to its success and (2) the transactions costs of reaching an agreement to compensate these interests for their losses under the efficient property rights were prohibitive. A comparison of the successes and failures of commodity exchanges reveals that exchanges succeed when the benefits of exchange governance are symmetric and fail when the costs and benefits are extremely asymmetric. Copyright 1995 by the University of Chicago.

Date: 1995
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://dx.doi.org/10.1086/467959 (application/pdf)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlstud:v:24:y:1995:i:1:p:229-55

Access Statistics for this article

More articles in The Journal of Legal Studies from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().