A Transaction Cost Approach to the Effects of Network Growth on Cost and Price

Abstract

Modern society contains many transaction relationships that are supported by information and communication technology. Therefore, the evolution of information and communication technology extends the potential applications of transaction cost theory. This paper also contributes to the extension. This paper aims to examine the role played by information in transactions from the standpoint of transaction cost theory; as a result, this paper will describe the effects of information and communication technology on transactions in accordance with transaction cost theory and describe the simultaneous achievement of cost economizing and higher prices as an application of transaction cost theory. Using information and communication technology can help to economize transaction costs. However, it is also worthwhile to mention that rising costs of transactions become apparent simultaneously, particularly when network growth facilitates an increase in the number of new potential transaction partners. Even more important is the fact that when we attempt to return to the criteria for determining efficiency in transaction cost theory, we find the possibility of increasing the price of a good or service.

Effects of E-Tendering on Organization Performance in Public Sector: A Case of Nairobi City County Government

“…The disparity in the distribution of the requisite information among the players affects their efficiency and consequently the transaction costs. The active use of the information and communication has greatly contributed to the reduction of transactions costs (Toyama, 2007). Cordella (2001) and Toyama (2007) noted that the adoption and use of the information technology in business processes can result in the reduction of transaction costs.…”

“…The active use of the information and communication has greatly contributed to the reduction of transactions costs (Toyama, 2007). Cordella (2001) and Toyama (2007) noted that the adoption and use of the information technology in business processes can result in the reduction of transaction costs. This has been supported by the information technology, which has made it easily for more information to be available to the decision makers.…”