Coase and the Transaction Cost Approach to Regulation

18 Pages Posted: 11 Jun 2015

See all articles by Marian W. Moszoro

Marian W. Moszoro

Warsaw School of Economics (SGH); International Monetary Fund (IMF); George Mason University - Department of Economics; George Mason University - Interdisciplinary Center for Economic Science (ICES)

Pablo T. Spiller

University of California, Berkeley - Business & Public Policy Group

Date Written: June 8, 2015

Abstract

Early economic research on natural monopoly regulation focused on market failure -- pricing tariffs and externalities. While Coase's multi-tariff marginal cost pricing became the standard, his approach to externality regulation as a contractual issue shifted the debate to transaction costs, but failed to recognize the associated political hazards. The renewed approach to regulation is more cognizant of the interplay of transaction costs and political hazards. In this paper, we show that regulatory rigidities arise as a response to political hazards of opportunistic expropriation and challenges from interested third parties to public agents.

Keywords: Utilities, Regulation, Transaction Costs, Politics, Coase

JEL Classification: L14, L24, L33, L51

Suggested Citation

Moszoro, Marian W. and Spiller, Pablo T., Coase and the Transaction Cost Approach to Regulation (June 8, 2015). Available at SSRN: https://ssrn.com/abstract=2616404 or http://dx.doi.org/10.2139/ssrn.2616404

Marian W. Moszoro (Contact Author)

Warsaw School of Economics (SGH) ( email )

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
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George Mason University - Department of Economics ( email )

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HOME PAGE: http://economics.gmu.edu/people/mmoszoro

George Mason University - Interdisciplinary Center for Economic Science (ICES) ( email )

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George Mason University
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United States

Pablo T. Spiller

University of California, Berkeley - Business & Public Policy Group ( email )

545 Student Services Building
Berkeley, CA 94720
United States
510-642-1502 (Phone)
510-642-2826 (Fax)

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