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Reducing transaction costs of tradable permit schemes using Blockchain smart contracts
Author(s) -
Shahab Sina,
Allam Zaheer
Publication year - 2020
Publication title -
growth and change
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.657
H-Index - 55
eISSN - 1468-2257
pISSN - 0017-4815
DOI - 10.1111/grow.12342
Subject(s) - transaction cost , order (exchange) , intermediary , database transaction , quality (philosophy) , business , limiting , information asymmetry , industrial organization , blockchain , computer science , computer security , finance , database , mechanical engineering , philosophy , epistemology , engineering
Tradable permit schemes (TPS) are market‐based policy instruments, which are claimed to be more statically and dynamically efficient in achieving their policy objectives compared to the traditional regulatory instruments. However, some researchers argue that the high level of transaction costs associated with these policy instruments might undermine their efficiency. This paper addresses this issue through exploring the use of Blockchain technology in order to lower transaction costs that arise from TPS transactions. More specifically, it identifies the benefits of using Blockchain smart contracts in implementing TPS that include: increasing the amount of relevant information available to interested actors thus reducing uncertainties; reducing the amount of irrelevant information available to interested actors thus decreasing complexities; correcting information asymmetries among the actors involved thus limiting opportunistic behaviours; lowering the need for the involvement of intermediaries thus decreasing direct monetary costs; and facilitating the linkage between buyers and sellers thus improving trading quality. These potential benefits can increase the efficiency of TPS by decreasing policy‐related transaction costs.