Ronald Coase is the founder of neo-institutionalism.It was he who in 1937 in his work "The Nature of the Firm" laid the idea of transaction costs, which refers to the cost of running the market system.Later, this definition has changed.They began to be treated as a cost of exploitation and economic systems.North
transaction costs seen as a source of social and political institutions.That is, institutions and various kinds of contracts exist in order to save this cost element.
Transaction costs firms play an important role in deciding whether or not to open a company, they arise when individuals exchange ownership rights in the conditions of incomplete information.These costs are considered in connection with the advancement of the contract, with the conclusion (registration) contract and monitoring of the contract.
transaction costs are the following:
- search for information, which consist of the cost of resources, the time required to conduct the search and of the losses that are associated with the imperfection and incompleteness of the acquired information.
- measurements.These include the costs of the measurement, the measuring technique as well as the implementation of measures aimed at ensuring the security of the sides of the measurement errors and the loss of error.
- contracting and negotiation.
- specification and protection of property rights.This includes the maintenance costs of the arbitration, the courts, state agencies, the cost of time and resources needed for restoration of violated rights, as well as losses caused by poor specification of the rights and protection of their unreliable.
- opportunistic behavior.
Williamson considered transaction costs in frequency and asset specificity:
- 1 level.One-time exchange between the parties on an anonymous market.There is no asset specificity, and the key is the price level.Assets: item buy and sell money.
- 2 level.Repeated exchange between the parties of bulk commodities.The frequency increases, but the specificity of the assets yet.There is a system preference.Repeated buying and, consequently, we save on the information, because we know that the product quality.
- 3 level.Repeating a contract that is associated with investments in specific assets.Specific assets are under a certain transaction.Here there are losses in the termination of the contract on the sale of specific assets.There is a relationship about damages or in the distribution of risk.
- 4 level.Investments in the unique assets (idiosyncratic assets).Active rigidly tied to a particular function (technology).Idiosyncratic transactions require the joint efforts of the company.Between firms fundamental transaction occurs, ie non-market type of communication, interdependence of the sides apart.Of course, the customer can go to another provider, but it is not profitable to both parties.
Managerial transaction costs - is cost of the contract between the firm and its employees.They include the costs of personnel management, the protection of the absorption, ie, the cost of establishing, maintaining and changing the organization.Also, operating costs are allocated the organization, the costs associated with the physical crossing of frontiers for goods and services related manufacturing processes.
problem of updating and modifying forms of documentation - it is also the transaction costs.
The value of this type of costs depends on the behavior of individuals.Hence, the need to invest to create a favorable climate in the enterprise.A big problem is a measurement of this type of expenditure.
