Contracts and Transaction Costs in New Institutional Economics
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Publication date: 2005-08-31
GNPJE 2005;201(7-8):45-64
The aim of the article is to review and systematize concepts used in an approach known as new institutional economics (NIE). The considerable development of NIE reflects the growing interest in the functioning of markets and enterprises under information asymmetry and non-cooperative market player behaviors. The negative effects of information asymmetry can be reduced or completely eliminated with the help of institutional solutions. The article focuses on contracts and transaction costs. The author argues that the key role of contracts is to enable maximum savings of resources and their allocation to areas with the highest rates of growth. This approach leads to reduced transaction costs and is a viable measure of the effectiveness of business contracts.
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