Comparative Institutional Economics: The Governance of Rail Freight Contracting

IN recent years both economists' and lawyers2 have studied the factors that lead private parties to adopt a particular institutional framework for their voluntary transactions. Their inquiry has been into the question of "governance choice." The term governance is a shorthand expression for the institutional framework in which contracts are initiated, negotiated, monitored, adapted, enforced, and terminated.3 To date, however, the literature on the subject has been largely conceptual. One of its central theoretical propositions, attributable to both Williamson and Klein, Crawford, and Alchian, is that the most significant factor affecting the governance choice is the extent to which the parties have made idiosyn-