TRANSACTION COST ANALYSIS ala Williamson

SITUATION

STRUCTURE PERFORMANCE
*Williamson (1985) (1989)


1. Immobile asset (transaction specific)

Assumptions:

1. Info. cost - future uncertain

2. Bounded rationality

3. Opportunistic with guile

4. One time (not repeated)



Model is used to predict structure, given the situation. So structure preferred varies with degree of asset specificity. Economizing process.

________________________________

Measurement cost p.80

re: deeds and rewards

More akin to info. cost and

consumer problems in PPPC

Firms are free to choose among the following:


1. Adm. (integrated. firm) hierarchy.



2. Mkt. (contract unavoidably incomplete)

a. "Fundamental Transformation"

 

3. Third party assistance (mediator)





4. Legal Centralism vs. Private Gov.

If firms free to choose among the above . . .

Firms choose structure to economize.


1. Use low cost specific asset

probably with econ. of scale.

 

2. Use high cost general asset.

a. At outset, competition. A could buy from many sources - Later, A is locked to B as only source. Possible hold-up.

3. ?

No issue of power.



4. Transaction costs minimized with hierarchy.

Economizing is key question.

Hodgson & Richardson & Schelling

Info Cost re: plans of others. Problem of oversupply. Immobile assets a problem.

Koopmann "Strategic Uncertainty"

1. Market

2. MITI in Japan, German banks

3. Agr. Mkt. Orders (Adm.)

4. Conventions, eg. adm. prices (status)

1. Can't supply info to prevent oversupply.

2. Prevent oversupply.

3. Prevent oversupply.

4. Prevent oversupply.



810\SSPtrans.htm 10/9/96