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Macroeconomics I – The goals and decisions of organisations

Transaction costs

5.1 Produce in-house or outsource – different costs

 Produce in-house – production costs (direct and indirect costs of producing the
goods or services)
– transaction costs (e.g. warehousing and distribution)

 Outsource – transaction costs (e.g. legal costs of drawing up contract,
quality control of goods delivered from the supplier)

Types of transaction costs:

 Search and information costs

 Bargaining and decision costs

 Policing and enforcement costs

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