Showing papers by "Oliver E. Williamson published in 2016"

Peak-load pricing and optimal capacity under indivisibility constraints

Abstract: The problem of peak-load pricing has been "solved" at least four times in the postwar literature (by Marcel Boiteux [1], Hendrik Houthakker [4], Peter Steiner [7 ], and Jack Hirshleifer [3 ]), and thus an additional treatment of this subject requires some justification.' Ours is threefold. First, the welfare motivation of these analyses has been generally lacking,2 and it is therefore difficult to evaluate the results obtained. Second, the geometric techniques that have been provided are awkward and unconventional, require that costs be redefined for each change in the number of subperiods, and cannot easily be generalized to handle the case of unequal-duration-subperiod loads. We attempt to remedy each of these deficiencies and, in addition, extend the analysis of peak-load pricing by replacing the usual assumption of fully divisible plant by one in which investment opportunities are discrete. This latter may be of little practical importance,3 but it helps shed additional insights on the welfare attributes of the problem.

A Comparison of Alternative Approaches to Economic Organization

Abstract: The three different approaches to the study of economic organization with which the conference papers are concerned are property rights, agency theory/ mechanism design, and transaction costs. Each of these examines economic organization in contractual terms, whence all differ from the neoclassical theory of the firm which works out of a noncontractual (essentially technological) perspective. Section 1 sets out a general schema for describing alternative theories of firm and market organization. Comparisons between property rights, agency, and transaction cost approaches are the subject of Section 2. Concluding remarks follow.

Credible Commitments: Further Remarks

Abstract: I distinguish between unilateral and bilateral trading relations in an earlier article in this Review (1983) in which I examined the use of hostages (or their commercial equivalents) to support exchange. The purposes of this note are 1) to confirm the optimality of reciprocal trading by explicitly displaying the combined net benefit relations, and 2) to acknowledge a previously unremarked complication that arises when nonsalvageable assets are used as hostages in a unilateral trade.

The Evolving Science of Organization

Abstract: The science of organization that is herein described has progressively evolved through four successive stages. The first stage is associated with Ronald Coase and entails "informal" analysis. Stages two and three involve "preformai" and "semiformal" analysis and are associated with transaction cost economics. A "fully formal" treatment of what transaction cost economies describes as "incomplete contracting in its entirety" completes the sequence. The paper then examines the requisites for a theory of good order and workable arrangements. This involves the combined study of law, economics, and organization. The object is to develop a symmetrical (comparative institutional) analysis of the powers and limits of each generic form of economic organization. (JEL: B25, B41)