Evidence item

Coase attributes firms to the costs of using the price mechanism and separate market contracts, with firm expansion bounded by internal organization costs versus open-market costs. DIRECT_TEXT

Authenticity UNVERIFIED · extraction UNVERIFIED · independence group none (unreviewed) · created seq 10460

Source: The Nature of the Firm · locator {} · excerpt hash sha256:d1df48ac9d7ae8e08a86322464795731a1dc7e7485a60f432ae61c5108ecb178

Exact excerpt

The main reason why it is profitable to establish a firm would seem to be that there is a cost of using the price mechanism. ... The costs of negotiating and concluding a separate contract for each exchange transaction which takes place on a market must also be taken into account. ... For this series of contracts is substituted one. ... A firm will tend to expand until the costs of organising an extra transaction within the firm become equal to the costs of carrying out the same transaction by means of an exchange on the open market.

Linked claims

Claim	Direction	Relevance	Steps	Counted
fc181a2f	SUPPORT	DIRECT	1	yes

Audits

None.