are the costs arising from organising the transfer of goods and services between two agents (Cheung, 1992). Transaction costs provide the key to understanding alternative forms of economic organisation and contractual arrangement. What is important is the cost of conducting transactions in one organisational or contractual form relative to the others. Therefore, what matters is not the absolute amount of transaction costs, but the relative ranking of transaction costs associated with different organisational or contractual choices.
For a general overview of how TCs can be measured see Wang (2003). In agri-environment schemes (AES) a basic distinction can be made between private TCs, borne by farmers, and public TCs that are borne by the government (Mettepenningen et al., 2009). Private TCs can be categorised in three major groups: search costs, negotiation costs and monitoring and enforcement costs (Dahlman, 1979; Hobbs, 2004).
Cheung, S.N.S., 1992. On the New Institutional Economics. In Werin, L., and Wijkander, H. (eds). Contract Economics. Oxford: Blackwell, 48-65.
Dahlman, C.J., 1979. The Problem of Externality. Journal of Law and Economics 22, 141-162.
Hobbs, J., 2004. Markets in Metamorphosis: The Rise and Fall of Policy Institutions. in Van Huylenbroeck, G., Verbeke, W., and Lauwers, L. (eds). Role of Institutions in Rural Policies and Agricultural Markets. Amsterdam: Elsevier, 199-212.
Mettepenningen, E., A. Verspecht and G. Van Huylenbroeck, 2009. Measuring private transaction costs of European agri-environmental schemes. Journal of Environmental Planning and Management 52 (5) 649-667. DOI: /10.1080/09640560902958206
Wang, N. 2003. Measuring Transaction Costs: An Incomplete Survey.Ronald Coase Institute Working Papers, Number 2.