MECHANISM OF SUPPLY FORMATION ON THE INSTITUTIONAL MARKET
MECHANISM OF SUPPLY FORMATION ON THE INSTITUTIONAL MARKET

Summary/Abstract: Purpose. The purpose of the paper is to research mechanism of supply formation on the market of institutions as network goods. Design/methodology/approach. We consider the supply of institutions as the amounts of transactions that institutional entrepreneurs are willing and able to guarantee at each of a series of possible prices (transaction costs) during a specific period.The article analyzes the direct dependence of institutional supply and their price. Findings. The causes of this relationship are economic interests of institutional entrepreneurs, the institutional possibility concept, increasing costs of additional institutional regulation. Network effects affect supply of institutions in a different way. Critical mass of the institutional network, backward compatibility of institutions,QWERTY- effects are the causes of inverse correlation between institutional supply and the price of institutes.Practical implications. Institutional entrepreneurs should create or simulate creation of a critical mass of institute’s users for its effective implementation in economic system. New institutional networks should provide new opportunities for economic actors while retaining old, familiar facilities.QWERTY-effect means that the propagation velocity of an institute is more important than its price and quality. Originality/value. Changes of institutional supply are the result of both price and network effects.This approach allows us to effectively promote or inhibit the development of specific rules of economic behaviour

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