Transaction Cost Economics

Oliver E. Williamson
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Oliver E. Williamson: University of California

Chapter 4 in Handbook of New Institutional Economics, 2025, pp 47-71 from Springer

Abstract: Abstract This chapter analyzes how transaction cost economics provides an understanding of complex economic organization by selectively joining law, economics, and organization theory. As against neoclassical economics, which is predominantly concerned with price and output, relies extensively on marginal analysis, and describes the firm as a production function (which is a technological construction), transaction cost economics (TCE) is concerned with the allocation of economic activity across alternative modes of organization (markets, firms, bureaus, etc.), employs discrete structural analysis, and describes the firm as a governance structure (which is an organizational construction). I begin by contrasting the lens of contract (out of which TCE works) with the lens of choice (orthodoxy). Vertical integration, which is the paradigm problem for TCE, is then examined. The operationalization of TCE is discussed in Sect. 4.4. Variations on a theme are sketched in Sect. 4.5. Public policy is discussed in Sect. 4.6. Concluding remarks follow.

Keywords: Transaction cost; Organizational economics; Contracting; Vertical integration; Governance (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-50810-3_4

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DOI: 10.1007/978-3-031-50810-3_4

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