Transaction cost economics addresses why firms exist to minimize transaction costs between buyers and sellers. It analyzes the costs of searching for trading partners, bargaining, and enforcing contracts. There are different types of transaction costs, including search costs, bargaining costs, and monitoring costs. The theory suggests that high transaction costs may favor hierarchies like firms over market exchanges, depending on factors like bounded rationality, opportunism, information asymmetry, asset specificity, and small numbers of traders.

1. SEMINAR ON CORPORATE
GOVERNANCE
 TOPIC – TRANSACTION
COST ECONOMIC.
SUBMITTED TO PRESENTED BY
DR. ANISHA SATSANGI HARSH JAIN
M.COM 1ST SEM

2. CONTENT :-
 INTRODUCTION
 MEANING OF TRANSACTION COST
ECONOMICS
 CONCISE DESCRIPTION OF THEORY
 DIAGRAM
 STRUCTURE
 TYPES OF TRANSACTION COST ECONOMICS

3. INTRODUCTION
The theory of transaction cost economics, also called
social cost theory, is a contractual concept developed
by British economist Ronald Coase in 1937 and
refined by American economist Oliver Williamson in
1975. The theory addresses the importance of
companies or firms in a market economy.

4. MEANING OF TRANSACTION COST
ECONOMICS
Transaction Cost Economics is a
central theory in the field of Strategy.
It addresses questions about why
firms exist in the first place (i.e., to
minimize transaction costs), how
firms define their boundaries, and
how they ought to govern operations.

5. CONCISE DESCRIPTION OF THEORY
 In economics and related disciplines, a
transaction cost is a cost incurred in
making an economic exchange. A number
of different kinds of transaction costs exist.
 Search and information costs are costs
such as those incurred in determining that
the required good is available on the
market, who has the lowest price, etc.
 Bargaining costs are the costs required to
come to an acceptable agreement with the
other party to the transaction, drawing up
an appropriate contract, etc.

6. CONT.….....
 Transaction costs consist of costs incurred
in searching for the best supplier / partner
/ customer, the cost of establishing a
supposedly "tamper-proof" contract, and
the costs of monitoring and enforcing the
implementation of the contract.
 Transaction cost theorists assert that the
total cost incurred by a firm can be
grouped largely into two components—
transaction costs and production costs.
 Transaction cost economics suggests that
the costs and difficulties associated with
market transactions sometimes favor
hierarchies and sometimes markets as an
economic governance structure.

7. DIAGRAM

8.  ORGANISATIO
N
 TRANSACTIO
N
 TRANSACTIO
N COST
 GOALS
STRUCTURE

9. TYPES OF TRANSACTION
COST ECONOMICS
 BOUNDED RATIONALITY
 OPPORTUNISM
 INFORMATION ASYMMETRY
 ASSET SPECIFICITY
 SMALL NUMBER

10. THANK YOU