ORIGINAL ARTICLE
AXIOMATIC FORMULATION OF THE OPTIMAL TRANSACTION COST THEORY IN THE LEGAL PROCESS THROUGH COBB-DOUGLAS OPTIMIZATION
| 1 | 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
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
KEYWORDS
TOPICS
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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