Transaction Costs: Economies of Scale, Optimum, Equilibrium and Efficiency – A Game Theory-Based Model of Transaction Costs

Abstract

The aim of this article is to propose a core game theory model of transaction costs wherein it is indicated how direct costs determine the probability of loss and subsequent transaction costs. The existence of optimum is proven, and the way in which exposure influences the location of the optimum is demonstrated. The decisions are described as a two-player game and it is discussed how the transaction cost sharing rule determines whether the optimum point of transaction costs is the same as the equilibrium of the game. The dispute between actors regarding changing the share of transaction costs to be paid by each party is modeled by a non-cooperative bargaining game. Requirements of efficient transaction cost sharing rules are defined, and it is posited that solution exists which is not unique. Policy conclusions are also devised based on principles of design of institutions to influence the nature of transaction costs.

Specificity of Transaction Costs at Bioenergy Producers – A case Study

“…Tomasz Gruszecki [2002] distinguishes in this case: -pre-transaction costs -ex-ante, which relate to activities leading up to the transaction, including, inter alia, the costs of prospecting potential counterparties or preparing a contract proposal, -post-transaction costs -ex-post, which occur during the performance of the terms of the contract, including costs related, inter alia, to the resolution of disputes that arise between the partners to a given transaction. Ex-ante and ex-post transaction costs are interrelated and constitute an optimisation problem [Kállay et al 2020]. Hence, as Małgorzata Roszkowska [2019] pointed out, they should always be considered simultaneously.…”