Project Proposal

27 Oct

Project Proposal 8/28/2017
This description may be edited as needed. If it is edited, you will be notified by email.
On the first page of your proposal you should provide your full name, a proposal title,
and a proposal name (no more than three words). Your proposal should be no longer than five
pages double spaced and follow the five paragraph essay format shown below.
In the second part of this course teams of four-six persons will work on a project to
solve a transaction cost problem by designing an appropriate institutional change. The first
step in the project is to identify a transaction cost problem. You will receive a grade of up to
ten course points for your proposal. The guidelines for grading are given below.
Professor McCabe will determine which proposals will be assigned to teams. If your proposal is
to be assigned to a team you will be notified. Once you are notified you must prepare a five
minute pitch of your proposal. On the day of your project pitch, the remaining students will be
asked to rank the proposals in the order they would like to work on them. These preferences
will be taken into account in forming your teams. Having your proposal selected does not
necessarily mean you will get a good grade on this assignment. To get a good grade you must
follow the guidelines below.
Content and Grading
In writing up your proposal you should use the classic five paragraph essay. For ease of reading
use the subheadings shown below (one for each paragraph) in your report. Each subheading
will be graded on a twenty point raw score. In general, ten points will be awarded for grammar
and ten point will be awarded for content. If the subheading is not in your proposal you will
lose all credit for that part. Your final grade points will be your raw score divided by 10 and
rounded up to the nearest point. Grading is final.
Introduction: What is the problem?
a. Here you should use the transaction cost approach described in class to
identify the problem. (Provide at least one footnote reference.)
Narration: Why does the problem exist?
a. Here you should use the economic theory described in class to argue for the
existence of the problem. (Provide at least one footnote reference.)
3. Affirmation: What evidence is there that the problem exists?
a. Here use anecdotal data to provide evidence that the problem exists.
(Provide at least one footnote reference.)

4. Negation: Can the problem be fixed?
a. Hypothesize why the problem has yet to be fixed. Only use your best
hypothesis. (Provide at least one footnote reference.)
Conclusion: Your current idea on how to fix the problem.
Classification of Transaction Cost Problems
The transaction cost paradigm takes the view that exchange is the main value added
activity in an economy. Furthermore, there is a natural tendency to want to exchange. This
tendency is thwarted by the cost of exchange.
A transaction cost is any cost that makes it difficult to exchange goods and services. In this
course we identify the following forms of transaction costs. To solve a transaction cost problem
you must eliminate the underlying cause of the problem. This may not always be possible, and
even if it is possible it may not be desirable if it is too costly or is likely to lead to other
These are most of the transaction costs we discuss in class.
Market Transaction Costs
1. Coordination costs. Matching buyers and sellers (Network costs)
2. Contracting costs. Non-standardized or ambiguous terms.
3. Negotiation costs. Forming agreements.
4. Fulfilment costs. Completing contracts and dispute resolution.
5. Information costs. Asymmetric information and uncertainty.
6. Common value costs. Speculation
7. Property right costs. Determining or arbitrating rights.
Coase hypothesizes that high market transaction costs leads to the voluntary participation in
authoritarian organizations to make it easier to complete transactions. These are collections of
persons that participate in institutions that assign to the people specific rights in order to
complete certain aligned goals. But organizational have transaction costs as well.
Organizational Transaction Costs
1. Coordination costs. Matching managerial decisions to organizational goals.
2. Strategic costs. Incentives problems and principal-agent relationships.
3. Negotiation costs. Agreeing on rights, responsibilities, and non-pecuniary rewards.
4. Fulfilment costs. Credit assignment problems.
5. Information costs. Asymmetric information and uncertainty.
6. Property right problems. Common ownership problems.
As understanding of the causes of transaction costs continue to deepen, and as technologies for
reducing transaction costs continue to improve, we are finding new ways to reduce the costs of
exchange, and increase the benefits from exchange.

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Posted by on October 27, 2017 in Academic Writing



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