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The Business Model with Minimal Transaction Costs

In: Approaching Business Models from an Economic Perspective

Author

Listed:
  • Wei Wei

    (Peking University)

  • Wuxiang Zhu

    (Tsinghua University)

  • Guiping Lin

    (Peking University)

Abstract

Transactions are handled in two ways—through the market or by ownership transfer—and both incur a transaction cost. Market-based transactions initially have an information gap as a company ostensibly knows more about its own products, while customers have a clearer idea of their own preferences. The resulting negotiations to close this information gap may be time- and energy-consuming for both sides. After the transaction, long-term contracts and lockup risks occur. Long-term contract risks may lead to an independent advantage scenario when market conditions change, while the lockup risk can result in a price squeeze on the investing party. Additionally, scattered customers may suffer unfair prices or lower-than-expected quality due to a monopoly, which incurs enormous transaction cost for customers.

Suggested Citation

  • Wei Wei & Wuxiang Zhu & Guiping Lin, 2013. "The Business Model with Minimal Transaction Costs," SpringerBriefs in Business, in: Approaching Business Models from an Economic Perspective, edition 127, chapter 0, pages 25-46, Springer.
    • Handle: RePEc:spr:spbrcp:978-3-642-31023-2_3
    DOI: 10.1007/978-3-642-31023-2_3
    as

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