Transaction costs

Transaction costs are those costs that arise through the use of the market ( English market transaction costs ), i.e. in connection with the transaction of rights of disposal (e.g. purchase, sale, rent), or an internal hierarchy ( English managerial transaction costs ). The transaction cost theory states that there are also transaction costs for every transaction. The transaction cost theory is an elementary component of the new institutional economics .

Role of transaction costs

The amount of transaction costs can prevent transactions from taking place if, for example, the initial information costs for a potential buyer are so high that the transaction becomes prohibitively expensive. The existence of transaction costs also prevents buyers or sellers from finding the most favorable offer for them, since the transaction costs that increase with the search outweigh any advantages of further offers (doctrine of decreasing marginal yield ).

According to Ronald Coase, transaction costs are interpreted as market use costs. This explains, according to Coase, why certain economic players conduct a transaction on the market and others forego the market transaction and outsource the corresponding work to their company. For Coase, transaction costs are the reason why companies exist. This perspective differs from that of Oliver E. Williamson , according to which the costs arise from the limited rationality of the actors combined with opportunism, complexity of the environment and specificity of investments.

Transaction costs are also a central element in the development economics studies by Douglass North . In analyzing the development and prosperity of nations, however, North looks at the costs involved in creating markets at the institutional level. These costs differ fundamentally from transaction costs, which Coase discusses as market usage costs. North's transaction costs are market creation costs; H. meta-transaction costs in the classic sense. According to North, there are institutions that increase and decrease transaction costs in this regard. The inadequacies of many communities to create effective rules or institutions so that the "fulfillment of contracts" (- not the "conclusion of contracts") is secured at low cost, is for him the most important cause of a lack of economic growth, economic stagnation and underdevelopment.

The costs of a transaction depend on the form of coordination (see institutional economics ) under which the transaction takes place. Depending on the amount of the transaction costs, the exchange of goods takes place horizontally (market-based) or vertically (within a company). The basic principle: economic questions are formulated as contract problems.

Typology of transaction costs

The transaction costs include the following costs:

Ex ante (before the transaction is executed)

• Initiation costs (e.g. establishing contact)
• Information acquisition costs (e.g. search for information about potential transaction partners)
• Agreement costs (e.g. negotiations, contract formulation, agreement)

According to the German Income Tax Act, these costs are advertising costs .

Ex post (after the transaction has been carried out)

• Processing costs (e.g. brokerage fee, transport costs)
• Change costs / adjustment costs (e.g. schedule, quality, quantity and price changes)
• Control costs (e.g. compliance with deadlines, quality, quantity, price and confidentiality agreements, acceptance of the delivery)

According to German income tax law, these costs are to be offset against the profit of a transaction.

More specifically, transaction costs mean search, initiation, information, attribution, negotiation, decision, agreement, processing, security, enforcement, control, adjustment and termination costs.

Transaction costs arise e.g. B. when communication needs, communication problems, misunderstandings or conflicts arise between the people involved in a transaction.

The price of the goods does not fall under transaction costs as far as the pure production costs are concerned. Using the example of transport costs, however, it becomes clear that there is no clear opinion with regard to the delimitation of production costs from transaction costs. If the transport is interpreted as part of the transformation process, it is more likely to be attributed to the production costs. If, on the other hand, the transport (infrastructure) structure itself is seen as an institution that can be shaped by humans, this in turn suggests interpreting the transport costs as part of the transaction costs.

The amount of the transaction costs depends on ...

• Frequency of the transaction
• Specificity of the transaction (site specificity, plant specificity, human capital specificity, customer specificity)
• Strategic importance
• Transaction atmosphere
• Transaction uncertainty

Transaction costs, such as attribution or metering costs, can even prevent the existence of markets for certain goods. New forms of information can reduce these transaction costs (eBay, Wikipedia).

Political transaction costs

The attempt to transfer the transaction cost model to politics, especially to modern democracies , is based on the one hand on the application of the principal-agent theory to the principle of representation or delegation: the elected representatives are the agents of the principal, i.e. the electorate, but the Checking the degree of fulfillment of their mandate, which they receive through election or referendum (by keeping the election promises) is extremely difficult and costly for the voters. On the other hand, the approach of the political transaction costs is based on the thesis that political markets in which parties e.g. B. Forming coalitions are far less efficient than ordinary goods markets because the goods to be exchanged are difficult to quantify and because it is difficult to contractually fix the promises about the services to be provided by the exchange partners. The effort involved in negotiating and reviewing the contracts is correspondingly high.

History of ideas

For his transaction cost approach , including in "The Nature of the Firm" from 1937, Ronald Coase received the 1991 Nobel Prize in Economics .

Oliver E. Williamson received (together with Elinor Ostrom ) the Nobel Prize for Economics in 2009 for his considerations on the theory of transaction costs. His approach shows how the functioning of markets and hierarchical structures (e.g. in companies) can be examined for their efficiency.

literature

• Ronald H. Coase: The Nature of the Firm. In: Economica. 4: 386-405 (1937).
• Douglass C. North, Monika Streissler (transl.): Institutions, institutional change and economic performance. Mohr, Tübingen 1992, ISBN 3-16-146024-3 . (Reprint: 1992, Org .: Institutions, institutional change and economic performance)
• Arnold Picot, Ralf Reichwald, Rolf T. Wigand: The limitless enterprise: information, organization and management . 3rd, revised. Edition. Gabler, Wiesbaden 1998, ISBN 3-409-32214-0 .
• Oliver E. Williamson, Monika Streissler (transl.): The economic institutions of capitalism: companies, markets, cooperation. Mohr, Tübingen 1990, ISBN 3-16-145612-2 . (Org .: The economic institutions of capitalism)
• Oliver E. Williamson: Markets and hierarchies, analysis and antitrust implications: a study in the economics of internal organization . Free Press, New York 1975, ISBN 0-02-935360-2 .

Individual evidence

1. ↑ Guido Schröder: Approach matters - The ambivalent meaning of rationality and transaction costs in Douglass North's approach to development economics. (PDF; 158 kB) In: Ingo Pies, Martin Leschke (Ed.): Douglass Norths economic theory of history. (= Concepts of Social Theory. No. 15). Tübingen 2009, pp. 33-47.
2. ^ DC North: Institutions, institutional change and economic performance (1998), p. 65 u. 160f.
3. ↑ Stefan Kotte: Political transaction costs in democracy. Verlag Peter Lang 2004, ISBN 978-3-631-53141-9 .
4. ^ Douglass North: Institutions and Crdible Commitment. In: Journal of Institutional and Theoretical Economics. 149/1 (1993), pp. 11-23.