Table of Contents

The Elgar Companion to Transaction Cost Economics

The Elgar Companion to Transaction Cost Economics

Elgar original reference

Edited by Peter G. Klein and Michael E. Sykuta

Since its emergence in the 1970s, transaction cost economics (TCE) has become a leading approach in the research on contracts, firm organization and strategy, antitrust, marketing, inter-firm collaboration and entrepreneurship. With contributions by leading scholars in economics, law and business administration – including Oliver E. Williamson, recipient of the 2009 Nobel Prize in economics for his development of the transaction cost approach – this volume reviews the latest developments in TCE and applies them to contemporary theoretical and empirical problems.

Chapter 13: The Transaction as the Unit of Analysis

Nicholas Argyres

Subjects: economics and finance, industrial economics, industrial organisation


Nicholas Argyres Transaction cost economics (TCE) is so named because it analyzes the costs of different kinds of ‘transactions’. Indeed, one of the important departures TCE makes from neoclassical economics is to take the ‘transaction’ as its unit of analysis (Williamson, 1985). In this chapter, I discuss how the transaction is a different unit of analysis than that of neoclassical economics, and then discuss some of the advantages and limitations of analyzing economic activity at the level of the transaction. Neoclassical economics is primarily the study of economic choices by individual consumers or firms. It is concerned, for example, with how the price system guides consumer and firm choices about how much to produce and consume of various goods, with the implications of these choices for the allocation of resources in particular markets, and with overall social welfare. In models of general equilibrium, consumers and firms are assumed to enjoy many alternate trading opportunities for inputs and outputs, and to act autonomously in choosing which of these opportunities to pursue. Trade is generally treated as involving discrete, well-defined goods (‘spot market’ trades), or promises of future delivery of such goods (‘futures market’ trades). This focus on the individual decision-making unit arguably led neoclassical economics to neglect an important feature of economic activity; namely, trading relationships between two economic actors, such as firms, in which the terms of trade are not fully defined, and where the value of continuing the relationship is high because both sides’ outside trading options are much...

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information