The Business Model with Minimal Transaction Costs

Wei Wei, Wuxiang Zhu and Guiping Lin ()
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Wei Wei: Peking University
Wuxiang Zhu: Tsinghua University
Guiping Lin: Peking University

Chapter Chapter 3 in Approaching Business Models from an Economic Perspective, 2013, pp 25-46 from Springer

Abstract: Abstract Transactions are handled in two ways—through the market or by ownership transfer—and both incur a transaction cost. Market-based transactions initially have an information gap as a company ostensibly knows more about its own products, while customers have a clearer idea of their own preferences. The resulting negotiations to close this information gap may be time- and energy-consuming for both sides. After the transaction, long-term contracts and lockup risks occur. Long-term contract risks may lead to an independent advantage scenario when market conditions change, while the lockup risk can result in a price squeeze on the investing party. Additionally, scattered customers may suffer unfair prices or lower-than-expected quality due to a monopoly, which incurs enormous transaction cost for customers.

Keywords: Housing Price; General Meeting; Exchange Shop; Store Manager; Mortgage Loan (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:spbrcp:978-3-642-31023-2_3

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DOI: 10.1007/978-3-642-31023-2_3

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