Cooperation, Opportunism, and the Invisible Hand: Implications for Transaction Cost Theory

Transaction cost theorists have generally neglected to consider the implications that the invisible hand of the market mechanism can have for the risk of opportunism. In the long run, the invisible hand deletes actors whose behaviors are habitually opportunistic. Consequently, as markets move toward the state of competitive equilibrium, the risk of opportunism will be low, even for transactions supported by specific asset investments. Therefore, in many contexts the transaction cost rationale for internalization has been overstated.

[1]  A. Alchian.  Uncertainty, Evolution, and Economic Theory , 1950, Journal of Political Economy.

[2]  Howard Raiffa,et al.  Games And Decisions , 1958 .

[3]  George A. Akerlof.  The Market for “Lemons”: Quality Uncertainty and the Market Mechanism , 1970 .

[4]  C. Perrow.  Complex Organizations: A Critical Essay , 1975 .

[5]  H. Demsetz,et al.  Production, Information Costs, and Economic Organization , 1975, IEEE Engineering Management Review.

[6]  M. Casson,et al.  The future of the multinational enterprise , 1977 .

[7]  O. Williamson,et al.  Markets and Hierarchies: Analysis and Antitrust Implications. , 1977 .

[8]  B. Klein,et al.  Vertical Integration, Appropriable Rents, and the Competitive Contracting Process , 1978, The Journal of Law and Economics.

[9]  R. Axelrod.  Effective Choice in the Prisoner's Dilemma , 1980 .

[10]  E. Fama.  Agency Problems and the Theory of the Firm , 1980, Journal of Political Economy.

[11]  K. N. M. Dundas,et al.  Corporate strategy and the concept of market failure , 1980 .

[12]  William G. Ouchi,et al.  Markets, Bureaucracies, and Clans. , 1980 .

[13]  R. Axelrod.  The Emergence of Cooperation among Egoists , 1981, American Political Science Review.

[14]  David J. Teece,et al.  Towards an economic theory of the multiproduct firm , 1982 .

[15]  S. Winter,et al.  An evolutionary theory of economic change , 1983 .

[16]  W. Baumol,et al.  Contestable Markets and the Theory of Industry Structure , 1982 .

[17]  Richard S. Ruback,et al.  The Market for Corporate Control: The Scientific Evidence , 2002 .

[18]  M. Spence,et al.  Contestable Markets and the Theory of Industry Structure: A Review Article , 1983 .

[19]  Gareth R. Jones.  Transaction Costs, Property Rights, and Organizational Culture: An Exchange Perspective. , 1983 .

[20]  G. Walker,et al.  A Transaction Cost Approach to Make-or-Buy Decisions , 1984 .

[21]  David C. Schmittlein,et al.  Integration of the sales force: an empirical examination , 1984 .

[22]  W. Hamilton,et al.  The Evolution of Cooperation , 1984 .

[23]  Gareth R. Jones.  Task Visibility, Free Riding, and Shirking: Explaining the Effect of Structure and Technology on Employee Behavior , 1984 .

[24]  A. V. D. Ven,et al.  Sociologists, Economists, and Opportunism , 1985 .

[25]  Mark S. Granovetter.  Economic Action and Social Structure: The Problem of Embeddedness , 1985, American Journal of Sociology.

[26]  Peter J. Buckley,et al.  The theory of the multinational enterprise , 1985 .

[27]  Gareth R. Jones,et al.  Transaction Cost Analysis of Service Organization-Customer Exchange , 1986 .

[28]  J. Friedman.  Game theory with applications to economics , 1986 .

[29]  Gareth R. Jones.  Organization-Client Transactions and Organizational Governance Structures , 1987 .

[30]  W. Dugger.  The Economic Institutions of Capitalism , 1987 .

[31]  A. Alchian,et al.  The Firm Is Dead; Long Live the Firm A Review of Oliver E. Williamson s The Economic Institutions of Capitalism* , 1988 .

[32]  Robert Jacobsen,et al.  The persistence of abnormal returns , 1988 .

[33]  Gareth R. Jones,et al.  Interorganizational Coordination in the Airline Industry, 1925-1938: A Transaction Cost Approach , 1988 .

[34]  J. Hennart,et al.  A transaction costs theory of equity joint ventures , 1988 .

[35]  Gareth R. Jones,et al.  Transaction cost analysis of strategy‐structure choice , 1988 .

[36]  C. Hill,et al.  Searching for a dynamic theory of the multinational enterprise: A transaction cost model , 1988 .

[37]  K. Provan,et al.  Interorganizational Dependence and Control as Predictors of Opportunism in Dealer-Supplier Relations , 1989 .