Question

In his 1937 article “The Nature of the Firm,” Coase claims that, over time, we should expect competitive market processes to select for ways of administrating market transactions that minimize the sum of transaction costs + bureaucratic costs. Can you explain why we should expect this?

I'm not exactly sure how to answer this question. Some helpful points would be great

Answer 1

Overtime,we should be expecting competitive market process to select for wage of administrative market transaction that will minimising the sum of transaction cost and bureaucratic cost, because there will be higher degree of transparency and technological advancement into the market and it will also mean that there will be a higher degree of public disclosure norms and there will be a responsibility of the organisation in order to protect the interest of the stakeholders so they are already being highly transparent and stakeholders need not to expand higher sum of money in order to find out about the true situations of the company and it will also mean that according to the newly enhanced technology there is a low cost of interaction between various market participants and it is leading to reduction in the overall cost of operations and reduction in the communication cost and it is also meaning that there is a high degree of regulation which can be done without getting personal so it will reflect into cutting of the additional cost which is leading to minimization of transaction cost along with the bureaucratic cost when we are analysing it through the perspective of competitive market as competitive market are highly dynamic and full of technological advancement.