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ORIGINAL ARTICLE
AXIOMATIC FORMULATION OF THE OPTIMAL TRANSACTION COST THEORY IN THE LEGAL PROCESS THROUGH COBB-DOUGLAS OPTIMIZATION
 
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School of Economics, School of Law and Intellectual Property, Zhejiang Gongshang University, China
CORRESPONDING AUTHOR
Kwadwo Osei Bonsu   

School of Economics, School of Law and Intellectual Property, Zhejiang Gongshang University, 18 Xuezheng St, Jianggan District, Hangzhou, Zheji, 310018, Hangzhou, China
Submission date: 2021-07-18
Final revision date: 2021-09-02
Acceptance date: 2021-09-03
Online publication date: 2021-09-30
Publication date: 2021-09-30
 
Economic and Regional Studies 2021;14(3):385–389
 
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ABSTRACT
Subject and purpose of work: This paper uses Cobb-Douglas optimization to formulate an optimal transaction cost algorithm within the constraint of a generalized legal framework. Materials and methods: The author has adopted a Lagrangian approach to formulate the social utility function, then, from a set of legally allowed strategies established the Karush-Kuhn-Tucker conditions for the legal game so as to find the optimal parameters within the social utility function. Finally, the optimal transaction cost algorithm was developed. Results: The Bordered Hessian Matrix from the partial differentials of the social utility function showed that there is a particular parameter within the social utility function which describes the optimal transaction cost. An adjustment of this parameter is essential in mechanism design for legal games. Conclusions: The author has shown how transaction costs influence the set of strategies played by players in a legal game, and has described the essence of a social utility function and how it can be optimized.
PEER REVIEW INFORMATION
Article has been screened for originality
 
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