Editing Transaction cost (section)

==Definition==
Williamson defines transaction costs as a cost innate in running an economic system of companies, comprising the total costs of making a transaction, including the cost of planning, deciding, changing plans, resolving disputes, and after-sales.<ref>{{cite web |last1=Downey |first1=Lucas |title=Transaction Costs |url=https://www.investopedia.com/terms/t/transactioncosts.asp |website=investopedia.com |access-date=21 May 2022}}</ref> According to Williamson, the determinants of transaction costs are frequency, [[Asset specificity|specificity]], uncertainty, limited rationality, and opportunistic behavior. 

Douglass North states that there are four factors that comprise transaction costs – "measurement", "enforcement", "ideological attitudes and perceptions", and "the size of the market".<ref name=":0" /> ''Measurement'' refers to the calculation of the value of all aspects of the good or service involved in the transaction.<ref name=":0" /> ''Enforcement'' can be defined as the need for an unbiased third party to ensure that neither party involved in the transaction reneges on their part of the deal.<ref name=":0" /> These first two factors appear in the concept of ''ideological attitudes and perceptions'', North's third aspect of transaction costs.<ref name=":0" /> Ideological attitudes and perceptions encapsulate each individual's set of values, which influences their interpretation of the world.<ref name=":0" /> The final aspect of transaction costs, according to North, is ''market size'', which affects the partiality or impartiality of transactions.<ref name=":0" /> 

Dahlman categorized the content of transaction activities into three broad categories:<ref>{{cite journal|last=Dahlman|first=Carl J.|year=1979|title=The Problem of Externality|journal=Journal of Law and Economics|volume=22|issue=1|pages=141–162|issn=0022-2186|quote=These, then, represent the first approximation to a workable concept of transaction costs: search and information costs, bargaining and decision costs, policing and enforcement costs.|doi=10.1086/466936|s2cid=154906153}}</ref><ref>{{Citation |title=Property rights, transaction costs, and institutions |date=1980-05-15 |work=The Open Field System and Beyond |pages=65–92 |url=http://dx.doi.org/10.1017/cbo9780511896392.004 |access-date=2023-04-23 |publisher=Cambridge University Press |doi=10.1017/cbo9780511896392.004 |isbn=9780521228817}}</ref>
* ''[[Search cost|Search and information costs]]'' are costs such as in determining that the required good is available on the market, which has the lowest price, etc.
*''Bargaining and decision costs'' are the costs required to come to an acceptable agreement with the other party to the transaction, drawing up an appropriate [[contract]] and so on. In [[game theory]] this is analyzed for instance in the [[game of chicken]]. On asset markets and in [[organizational economics]], the transaction cost is some function of the distance between the [[supply and demand]].
* ''Policing and enforcement costs'' are the costs of making sure the other party sticks to the terms of the contract, and taking appropriate action, often through the [[legal system]], if this turns out not to be the case.
[[Steven N. S. Cheung]] defines transaction costs as any costs that are not conceivable in a "[[Robinson Crusoe]] economy"—in other words, any costs that arise due to the existence of [[institution]]s. For Cheung, term "transaction costs" are better described as "institutional costs".<ref name="Cheung">Steven N. S. Cheung "On the New Institutional Economics", ''Contract Economics''</ref><ref name="Werin">L. Werin and H. Wijkander (eds.), Basil Blackwell, 1992, pp. 48-65</ref> Many economists, however, restrict this definition to exclude costs internal to an organization.<ref name="Demsetz">[[Harold Demsetz]] (2003) “Ownership and the Externality Problem.” In T. L. Anderson and F. S. McChesney (eds.) Property Rights: Cooperation, Conflict, and Law. Princeton, N.J.: Princeton University Press</ref>