1-Explain which three factors influence transaction costs and explain how they a
ID: 3796336 • Letter: 1
Question
1-Explain which three factors influence transaction costs and explain how they affect transaction costs.2-Explain which three aspects influence whether a transaction will be carried out on a market or in a hierarchy and explain how they affect this choice.
3-Explain how Malone, Yates and Benjamin argue that electronic markets will become the favoured coordination mechanism.
4-In a market, the buyer can compare different possible suppliers and select the one that provides the best combination of characteristics. For an electronic market the ‘electronic market hypothesis’ assumes that this results in minimizing production costs. Why?
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1-Explain which three factors influence transaction costs and explain how they affect transaction costs.
2-Explain which three aspects influence whether a transaction will be carried out on a market or in a hierarchy and explain how they affect this choice.
3-Explain how Malone, Yates and Benjamin argue that electronic markets will become the favoured coordination mechanism.
4-In a market, the buyer can compare different possible suppliers and select the one that provides the best combination of characteristics. For an electronic market the ‘electronic market hypothesis’ assumes that this results in minimizing production costs. Why?
Please if you are posting the question take a screen shot and post it do not type it in the comment area Post it as a picture or screenshot
1-Explain which three factors influence transaction costs and explain how they affect transaction costs.
2-Explain which three aspects influence whether a transaction will be carried out on a market or in a hierarchy and explain how they affect this choice.
3-Explain how Malone, Yates and Benjamin argue that electronic markets will become the favoured coordination mechanism.
4-In a market, the buyer can compare different possible suppliers and select the one that provides the best combination of characteristics. For an electronic market the ‘electronic market hypothesis’ assumes that this results in minimizing production costs. Why?
Please if you are posting the question take a screen shot and post it do not type it in the comment area Post it as a picture or screenshot
Explanation / Answer
A)
Bargaining costs are the costs required to come to an acceptable agreement with the other party to the transaction, drawing up an appropriate contract and so on. In game theory this is analyzed for instance in the game of chicken.Policing and enforcement costs are the costs of making sure the other party sticks to the terms of the contract, and taking appropriate action if this turns out not to be the case.These individual actions are really trans-actions instead of either individual behavior or the "exchange" of commodities. It is this shift from commodities and individuals to transactions and working rules of collective action that marks the transition from the classical and hedonic schools to the institutional schools of economic thinking. The shift is a change in the ultimate unit of economic investigation. The classic and hedonic economists, with their communistic and anarchistic offshoots, founded their theories on the relation of man to nature, but institutionalism is a relation of man to man.The term "transaction cost" is frequently thought to have been coined by Ronald Coase, who used it to develop a theoretical framework for predicting when certain economic tasks would be performed by firms, and when they would be performed on the market. However, the term is actually absent from his early work up to the 1970s. While he did not coin the specific term, Coase indeed discussed "costs of using the price mechanism" in his 1937 paper The Nature of the Firm, where he first discusses the concept of transaction costs, and refers to the "Costs of Market Transactions" in his seminal work, The Problem of Social Cost (1960). The term "Transaction Costs" itself can instead be traced back to the monetary economics literature of the 1950s, and does not appear to have been consciously 'coined' by any particular individual.Problematic property rights and contracts: whereas neoclassical theory often assumes that property rights are clearly defined and the cost of enforcing those rights by the means of courts is negligible, TCE treats property rights and contracts as problematic.whereas neoclassical theory uses continuous marginal modes of analysis in order to achieve second-order economizing TCE analyzes the basic structures of the firm and its governance in order to achieve first-order economizing.whereas neoclassical theory assumes hyperrationality and ignores most of the hazards related to opportunism, TCE assumes bounded rationality. whereas neoclassical theory is concerned with composite goods and services, TCE analyzes the transaction itself.
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