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Essay / Research Paper Abstract
This 5 page paper considers why transaction costs increase the number of firms in the market and also create firms as well as change and develop internal structures within an organisation. Theories of Hayek and Coase are considered and examples are used to illustrate the impact in the real world. The bibliography cites 4 sources.
Page Count:
5 pages (~225 words per page)
File: TS14_TEtranco.rtf
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Unformatted sample text from the term paper:
there may be increased efficiency, there are also the development of transaction costs. These are the type of costs that may not occur in ore rural or Robison Crusoe economies.
To counteract the costs that may be incurred, it is assumed that the student understands what are meant by transaction costs, both financial and non-financial, there have been developments, which
have included both the emergence of new companies industries as well as the reorganisation and internal development to reduce the impact of transaction cost These companies may appear to be
a contradiction of an efficient market. Indeed in many economic models there is not allowance for transaction these range form the smaller models that look at share price and investment
performance, to others that consider the entire economy. These both are relevant when considering what the development of companies and internal departments or measures have had to take place. If
the market was that efficient, as theorist such as Hayek have stated then these companies would not need to have emerged. The logical
conclusion has to be that the market is not as efficient as is generally perceived. The free market economy is generally seen as the best way of ensuring the goods
are made and allocated in the most effective manner, increasing growth and also the welfare of the free market economies. Hayek argues that this is the best method for a
market economy, the alternative is that of an economy that is state controlled (Hayek, 1996). The efficiently is caused by the decentralisation which is not possible in a government controlled
economy (Hayek, 1996). The decentralised structure is efficient at gathering and then communicating information (Hayek, 1996). It is this information flow that the will impact on the price of good.
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