Evidence item

Coase frames firm formation as a conditional cost comparison, with expansion bounded by internal versus market transaction costs. DIRECT_TEXT

Authenticity UNVERIFIED · extraction UNVERIFIED · independence group none (unreviewed) · created seq 15194

Source: The Nature of the Firm · locator {} · excerpt hash sha256:353541fac54d5863447429f5a21d78f3a30bba601b4b7cbcb0f6fb4642cb74aa

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. ... 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.