Efficiency versus measurement cost: Institutional diversity in network industries

Authors

  • Miguel Vazquez Universidade Federal Fluminense
  • Michelle Hallack Universidade Federal Fluminense

DOI:

https://doi.org/10.31501/ealr.v6i2.5531

Abstract

This paper explains the diversity in the institutional designs that coordinate network industries by analyzing the economic rationale of the design of rules to use the networks. We identify the network as a common-pool resource, and point at the definition of property rights as the elementary decision in the design of rules. It requires choosing what network characteristics need to be measured by market participants. We show that the institutional diversity is explained by the rationale behind that choice. The benefits of defining property rights come in terms of efficiency: the improvement in the coordination of participants’ information on the value of networks. The costs are associated with measuring network characteristics. When costs are higher than benefits for a certain network service, markets are no longer an adequate way to coordinate its allocation. In addition, when participants are heterogeneous, the benefits of measuring are high.

Downloads

Download data is not yet available.

Downloads

Published

2016-02-22

Issue

Vol. 6 No. 2 (2015): Economic Analysis of Law Review

Section

Papers

License

The submission of a paper to Economic Analysis of Law Review implies the transfer, by the author(s), to the Catholic University of Brasília (UCB), of the aforementioned work for purposes of reproduction, dissemination, distribution, printing, publication and availability.

This journal offers immediate free access to its content, following the principle that making scientific knowledge freely available to the public provides greater global democratization of knowledge.

Authors who submit manuscripts for publication in EALR irrevocably agree to the following terms:

  1. Authors retain copyright but grant Economic Analysis of Law Review the right of first publication, with the work simultaneously licensed under a Commons Attribution-Share License, after publication, allowing the sharing of the work with acknowledgment of its authorship and initial publication in this journal.
  2. Authors and EALR are authorized to sign additional contracts separately, for non-exclusive distribution of the version of the article published in this journal (e.g., publish in an institutional repository or as a book chapter), with recognition of authorship and initial publication in this journal.
  3. Authors are allowed and encouraged to publish and distribute their work online (e.g., in institutional repositories or on their personal webpage) at any point before or during the editorial process, as this can generate productive changes as well as increase impact and citation of the published work (see The Effect of Open Access).