Resource coordination and transaction costs

Abstract

We develop a framework to classify transaction costs. Our framework is based on the recognition that the types of transaction costs encountered in organizing production vary across the factors of production and over the stages of the production. Our framework allows us to distinguish between the transaction costs of using the market and those of using the firm. Most importantly, it enables us to see that transaction costs are a function of what factors an individual supplies to the production process. This insight, by illuminating the interdependence of transaction costs, contributes towards understanding the firm/market boundary.