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Social-Ecological Systems Meta-Analysis Database: Theory

Transaction costs and collective action

Variable relationship:

From the neoclassical perspective, the existence of externalities is considered a ‘market failure’ (Bator 1958). Given the Coasean perspective, it is still not a failure of the market; it is a rational result facing high transaction costs (Vatn 2005).

Transaction costs (Transaction Costs) can be defined as the costs of collecting information, and bargaining and monitoring contracts between economic agents (Vatn 2005).

As pointed out by Coase (1960), if transaction costs are zero and rights are defined, optimal allocation can be reached via direct bargains between the involved parties– for example, the polluter(s) and the victim(s).

In the environmental policy field, transaction costs have been associated with the design and implementation of policies. The costs of gathering information, designing the policies, bargaining among stakeholders, and monitoring performance, need to be balanced against the benefits of the policies. By definition, high transaction costs undermine the efficiency of policies; more importantly, high transaction costs can also undermine policy implementation (Collective Action) and effectiveness (Commons Condition Trend) (Vatn 2005).


Scientific Field
Component Type(s)


VariableRoleRole ExplanationValue
Transaction costsProximate independent variableLow transaction costs increase the efficiency and thus the likelihood resource management tasks such as collective choice and institutional design, enforcement, and conflict solving.Low
Collective actionIntermediate outcomeLow transaction costs facilitate collective action and, in economic terms, transactions between participants.High
Commons condition trendFinal outcomeLow transaction costs enable the collective action needed to sustain a commons.Remained the same or improved

Related Theories

TheoryRelationshipCharacterizing Variables
Conflict resolution and collective actionnested
Accountable leadershipnested
Group size and collective actionnested
Collective action and the commonscontains

Related Studies


Vatn, Arild. 2005. Institutions and the Environment. Cheltenham, UK: Edward Elgar Publishing.


Coase, Ronald Harry. 1960. “Problem of Social Cost, the.” JL & Econ. 3: 1.