Transaction costs in the works of the world's leading economists

R. Coase is the founder of neo-institutionalism. It was he who in 1937, in his work “the nature of the firm" laid the idea of transaction costs, which understood the costs of the functioning of the market system. Later this definition has changed somewhat. They were interpreted as costs from the operation of economic systems.

North saw transaction costs as the source of social and political institutions. That is, the institutions and the different types of contract exist in order to save this type of costs.

Transaction costs play an important role in deciding to open a company or not, they arise when individuals exchange ownership rights in the conditions of incomplete information. These costs are considered in connection with the promotion of the contract, with the conclusion (registration) of the contract and monitoring the performance of the contract.

There are the following transaction costs:

1. Information Search, which consist of overhead, the time required for conducting the search and of the losses that are associated with the imperfection and incompleteness of the acquired information.
2. Measurements. This includes the cost of conducting the measurement, the measuring equipment, as well as on the implementation of the measures aimed at safety of the parties from errors of measurement and losses from errors.
3. Contracting and negotiation.
4. The Specification and protection of property rights. These include costs of arbitration, courts, government agencies, resource costs and the time required to restore the violated rights, as well as losses caused by poor specification of rights and their protection unreliable.
5. Opportunistic behaviour.

Williamson had considered transaction costs on the frequency and specificity of assets:

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• 1 level. One-off exchanges between parties on an anonymous market. There is no specificity of assets, and the key is the price level. Assets the subject of purchase and sale, money.
• 2 level. A repeating exchange between the parties of mass goods. Frequency increases, but the specificity of the assets yet. There is a system preferences. Recurring purchase and therefore we save information because we know that this product is of high quality.
• 3 level. Repeating the contract that is associated with investments in specific assets. Specific assets are created under a particular transaction. There is a loss upon termination of the contract for sale of specific assets. There is a relationship around the damages or the allocation of risk.
• 4 level. Investments in unique assets (idiosyncratic assets). Asset rigidly tied to a specific function (technology). Idiosyncratic transactions require a joint effort of the firm. Among firms there is a fundamental transaction, that is, non-market relationships, the interdependence of the parties from each other. Of course, the buyer may go to another supplier, but it is unprofitable to both parties.

Managerial transaction costs – costs of the execution of the contract between the firm and its employees. They include the costs of personnel management, protection from takeovers, that is, the costs of establishing, maintaining and changing the organization itself. Also allocated costs organization costs associated with the physical crossing of goods and services of adjoining industrial processes.

The Problem of updates and changes in the forms documentation – also transaction costs.

The Magnitude of this cost depends on the behavior of individuals. Therefore, it is necessary investment to create a favorable climate in the company. The biggest problem is the measurement of this type of expenditure.