J.F. AAS Oct. 1996

Review & Application of All Transaction Cost Sources

Information As A Good / Information Aspect of Goods

Good= Production of Information/data


MC = 0

Trade secret rights.

To produce the info: use fees or taxes; private or public firms.

Ineffective if HEC.

Free vs unwilling riders.

Who pays fixed cost?

Who chooses quality?

Good= blood, coffee beans

HIC--measurement of labor or commodity quality.

Labeling regulation.

Labor identifies with firm.

Grameen banks.

Vickery auctions.

Consumers make few mistakes. Labor does not shirk. Ditto for borrowers.
Good= machines, human capital

Uncertainty + asset specificity.

Integration; hostages.

Non-standard contracts.

Franchise bidding.

Keiretsu; German banking.

Plantations. Farmer must buy inputs from processor.

Status--learned guile

Value of specific assets not lost. Trade-off between flexible technology and low cost per unit of output.

Degree of opportunism.

Contractual Cost

(Cost of negotiation)

Related to number of and access to parties.

Integration; the firm.

Contract enforcement

Damages vs injunction.

Class action rights.

Ability to trade impersonally at a distance.

Who gets rent?

Good= future state of world.

Uncertainty. Fickle engineers and consumers.

C-D Gap

Radical subjectivity--

(no names for variables)

Advertising. Consumer co-op


Subsidies to investment in new technology.


Learning the culture.

The firm.

Keiretsu, alliances

Consumers stay loyal.

Uncertainty reduced to risk.

Consumers stay until investments are recovered.

On net, get it right more than wrong. Acts of others predictable.

Work together to imagine and create the future. (Hodgson)

Good= rights (?). Costly to contract with govt. and everyone to establish ownership & to agree on what is a leading sector.

1. Security of rights (North)

2. Selected rights shifts,

Eg. Private eminent domain

Incentive to invest.

Reduces costs to establish leading sectors.


If you have any questions or comments, please email schmid@pilot.msu.edu

Back to Main Page