According to Williamson's transaction cost theory, hierarchies (≈ organizations) are more effective than markets if:
A) There are few actors who offer the same or similar item or service.
B) There is great knowledge of the parties about other parties and their offers.
C) There is great knowledge of the parties about other parties but not about their offers.
D) There are many actors who offer the same or similar item or service.

Question

Quizplus · Accepted Answer

According to Williamson's transaction cost theory, hierarchies (organizations) are more effective than markets when there are few actors who offer the same or similar item or service. In this situation, the transaction costs of using the market, such as searching for suppliers and negotiating contracts, would be higher than the transaction costs of using a hierarchy. In a hierarchy, these costs can be reduced because the decision-making power is centralized and information can be more easily shared.

According to Williamson's Transaction Cost Theory, Hierarchies (≈ Organizations) Are