The Institutional Economics of Stakeholder Consultation; How Experts Can Contribute to Reduce the Costs of Reaching Compromise Agreements

Abstract

Complicated projects, policy plans and government regulation usually involve a number of stakeholders with diverging interests. A good infrastructure for the consultation of, and for the discussion between these stakeholders is needed in order to avoid high implementation costs. Following the theory of new institutional economics these implementation costs can be seen as transaction costs. This is especially relevant in Government-to-Business (G2B) and Government-to-Consumers (G2C) relationships where the projects and policy measures bring about (re)distribution problems. This chapter discusses various ways to organize these consultations with the help of experts as intermediaries, so that a compromise agreement is reached on the solution of the (re)distribution problem. These institutionalized structures of consultation are referred to as “matching zones”. Practical experiences, mainly from the Netherlands, provide guidelines for the effective institutional setup of such “matching zones”. Specifically, the design of a “matching zone” should try to adhere to the following principles: (i) there should be a common interest and ample incentives for reaching an agreement; (ii) there should be the prospect of long, repeated interaction; (iii) there should be a balance between representation and efficiency; (iv) the constraints should be clear from the onset of the matching zone; (v) fairness should be strived for; (vi) IC technology should be utilized optimally; and (viii) informal contacts and an amicable atmosphere should be promoted. Most importantly, however, independent experts appear to fulfil an important role in order to reach compromise agreements at sufficiently low implementation costs.

Ten Wolde's part of the research project was financed by the “Transactieland.nl foundation”.