Transaction-cost Analysis: Types Of Cost Search Cost Negotiation Cost Monitoring Cost
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Transaction-cost Analysis • Organization undertake transaction with individual or with other firm • To complete any transaction, it requires a cost which is called ‘Transaction Cost’
Types of Cost Search Cost
Negotiation Cost
Monitoring Cost
Transaction-cost Analysis • Firm should produce goods & services internally where transaction cost is LESS THAN Purchasing form open market • The aim of transaction cost analysis is to take decision upon integration while keeping in mind cost and quality of product • If transaction cost is much HIGHER THAN Administrative cost, firm may choose Vertical Integration
Types of Cost Search Cost
Negotiation Cost
Monitoring Cost
Transaction-cost Analysis • Firm should produce goods & services internally where transaction cost is LESS THAN Purchasing form open market • The aim of transaction cost analysis is to take decision upon integration while keeping in mind cost and quality of product • If transaction cost is much HIGHER THAN Administrative cost, firm may choose Vertical Integration
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