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An Indirect Approach to the Identification and Measurement of Transaction Costs

In: The Economics of E-Commerce and Networking Decisions

Author

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  • George S. Rivers

Abstract

Nobel Laureate Ronald Coase had previously argued, in his paper titled ‘The Nature of the Firm’, that exchange was not costless and that ‘the most obvious cost of organizing production through the price mechanism is that of discovering what the relevant prices are’ (1937, p. 390). Coase identified the nature of such price discovery costs as being ‘the cost of negotiating and concluding a separate contract for each exchange transaction’ (1937, p. 390). Understanding the exact nature of such transaction costs becomes crucial for attaining transaction efficiency and thereby minimizing the cost of transactions. Moreover, transaction costs are seen to have deep implications for not only resource allocation but also the assignment of property rights and the structure of economic organization (Eggertsson, 1990). Put simply, transaction costs can be defined as being: ‘the costs incurred to achieve the benefits of exchange and cooperation’ (Denzau, 1992, p. 34).

Suggested Citation

  • George S. Rivers, 2003. "An Indirect Approach to the Identification and Measurement of Transaction Costs," Palgrave Macmillan Books, in: Yew-Kwang Ng & Heling Shi & Guang-Zhen Sun (ed.), The Economics of E-Commerce and Networking Decisions, chapter 13, pages 267-297, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-4039-3837-4_13
    DOI: 10.1057/9781403938374_13
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