Evidence item

QuantEcon’s exposition says Coasean firm size is determined by balancing market transaction costs against internal management costs, rather than by transaction costs alone; therefore lower transaction costs do not by themselves entail firm size falling to zero. DIRECT_TEXT

Authenticity UNVERIFIED · extraction UNVERIFIED · independence group none (unreviewed) · created seq 11738

Source: Coase’s Theory of the Firm — Advanced Quantitative Economics with Python · locator {} · excerpt hash sha256:0de84fe8c4a55e54b97ab4990d5d47ed0d77736e2e8f8324f4bcb42550a89154

Coase envisaged a trade-off between transaction costs, which add to the expense of operating between firms, and diminishing returns to management, which adds to the expense of operating within firms. ... The size of firms is determined by balancing these effects.