The study relied in the effect of self-selection on transaction cost economics through sustainable agro-ecosystem irrigation, from cross-section and longitudinal data collection methods obtained at household level and group level records in each irrigation scheme. Heckman selection model and mixed effect model were used to analyze data, which were collected using a well-prepared record sheet form, which obtained recorded information by the scheme over the period of ten years (2009)(2010)(2011)(2012)(2013)(2014)(2015)(2016)(2017)(2018) to compare groups dynamics and individual effects (heterogeneity) on institution quality across the schemes over time period. Findings show that self-selection effect has greater impact on farmers' survival, and transaction costs related to contact, contract and control influence institutional quality in agro-ecosystem irrigation group members. The study concludes that self-selection effect factors are important criteria for collective action member recruitment, and that the institutional quality is improved by managing transaction costs.