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  • Transaction-Cost Analysis

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    vrutika
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    This document discusses transaction cost analysis. It explains that when organizations undertake transactions with individuals or other firms, they incur transaction costs to complete the deal. These costs include search costs to find a trading partner, negotiation costs to come to an agreement, and monitoring costs to ensure the terms are upheld. The analysis aims to help firms decide whether to produce goods internally or purchase externally by comparing relative transaction and administrative costs, with the goal of minimizing costs while maintaining quality.

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    This document discusses transaction cost analysis. It explains that when organizations undertake transactions with individuals or other firms, they incur transaction costs to complete the deal. These costs include search costs to find a trading partner, negotiation costs to come to an agreement, and monitoring costs to ensure the terms are upheld. The analysis aims to help firms decide whether to produce goods internally or purchase externally by comparing relative transaction and administrative costs, with the goal of minimizing costs while maintaining quality.

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    Download as PPTX, PDF, TXT or read online from Scribd
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    15 views2 pages

    Transaction-Cost Analysis

    Uploaded by

    vrutika
    This document discusses transaction cost analysis. It explains that when organizations undertake transactions with individuals or other firms, they incur transaction costs to complete the deal. These costs include search costs to find a trading partner, negotiation costs to come to an agreement, and monitoring costs to ensure the terms are upheld. The analysis aims to help firms decide whether to produce goods internally or purchase externally by comparing relative transaction and administrative costs, with the goal of minimizing costs while maintaining quality.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 2

    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

    Negotiation Monitoring
    Search Cost
    Cost 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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