Uncertainty, Judgment, and the Theory of the Firm
(2015) In Journal of Institutional Economics 11(3). p.623-650- Abstract
- The effects of a truly uncertain future are more far-reaching than what has traditionally been assumed in transaction cost economics. Uncertain governance choices require that agents exercise judgment in the absence of other means of estimating the payoffs associated with complex combinations of transaction attributes, contractual contingencies, and governance structures. Judgments are made on an experimental basis to incrementally improve actors’ heterogeneous cognitive representations of the contractual landscape. I argue that uncertain governance choices are subject to specific decision-biases that interact with the potentially corrective function of current organization and asymmetries in actors’ access to decision-supporting systems.... (More)
- The effects of a truly uncertain future are more far-reaching than what has traditionally been assumed in transaction cost economics. Uncertain governance choices require that agents exercise judgment in the absence of other means of estimating the payoffs associated with complex combinations of transaction attributes, contractual contingencies, and governance structures. Judgments are made on an experimental basis to incrementally improve actors’ heterogeneous cognitive representations of the contractual landscape. I argue that uncertain governance choices are subject to specific decision-biases that interact with the potentially corrective function of current organization and asymmetries in actors’ access to decision-supporting systems. These asymmetries may affect the contracting parties’ preferences over differential governance structures. Specifically, by overestimating individual unbiased rationality and disregarding how access to decision-supporting systems may affect governance choice, transaction cost economics runs the risk of underestimating the degree of vertical integration in actual firms. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/4538761
- author
- Hallberg, Niklas Lars LU
- organization
- publishing date
- 2015
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- decision-biases, entrepreneurial judgment, transaction cost economics
- in
- Journal of Institutional Economics
- volume
- 11
- issue
- 3
- pages
- 623 - 650
- publisher
- Cambridge University Press
- external identifiers
-
- wos:000359282800014
- scopus:84938740848
- ISSN
- 1744-1382
- DOI
- 10.1017/S1744137414000381
- language
- English
- LU publication?
- yes
- id
- 7b533f84-4a50-44ea-9f5c-1c226f3a9d1e (old id 4538761)
- alternative location
- http://journals.cambridge.org/action/displayAbstract;jsessionid=1FE5734A703E3BF0C1D6552E8049A241.journals?aid=9887240&fileId=S1744137414000381
- date added to LUP
- 2016-04-01 10:02:38
- date last changed
- 2022-04-19 22:05:55
@article{7b533f84-4a50-44ea-9f5c-1c226f3a9d1e, abstract = {{The effects of a truly uncertain future are more far-reaching than what has traditionally been assumed in transaction cost economics. Uncertain governance choices require that agents exercise judgment in the absence of other means of estimating the payoffs associated with complex combinations of transaction attributes, contractual contingencies, and governance structures. Judgments are made on an experimental basis to incrementally improve actors’ heterogeneous cognitive representations of the contractual landscape. I argue that uncertain governance choices are subject to specific decision-biases that interact with the potentially corrective function of current organization and asymmetries in actors’ access to decision-supporting systems. These asymmetries may affect the contracting parties’ preferences over differential governance structures. Specifically, by overestimating individual unbiased rationality and disregarding how access to decision-supporting systems may affect governance choice, transaction cost economics runs the risk of underestimating the degree of vertical integration in actual firms.}}, author = {{Hallberg, Niklas Lars}}, issn = {{1744-1382}}, keywords = {{decision-biases; entrepreneurial judgment; transaction cost economics}}, language = {{eng}}, number = {{3}}, pages = {{623--650}}, publisher = {{Cambridge University Press}}, series = {{Journal of Institutional Economics}}, title = {{Uncertainty, Judgment, and the Theory of the Firm}}, url = {{http://dx.doi.org/10.1017/S1744137414000381}}, doi = {{10.1017/S1744137414000381}}, volume = {{11}}, year = {{2015}}, }