BUS 374 Lecture Notes - Lecture 2: Regal Entertainment Group, Movie Theater, Vertical Integration

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 374
• Professor: Rajiv Kozhikode

Document Summary

Intentionally rational, but limited: opportunism, people will work to their advantage, acting upon self-interest may lead to, distortion of information/misleading information, essentially, these two acts with an unethical connotation. Cooperation chapter 13: this chapter talks about the relationship between cooperation and capitalism. Identifies the circumstances under which different forms of transactional governance are most efficient: transaction costs include: Never: how opportunistic is the transaction, degree of asset specificity/ idiosyncratic investment, frequency with which it is repeated. Coase"s observation: there are costs to using the price mechanism for coordinating economic activity. Given this, alternative institutional arrangements may coordinate economic activity at a lower cost. Organizing a market costs something and by forming an organization and allowing some authority (entrepreneur) to direct the resources, some costs are saved. Firms exist to economize on the cost of coordinating economic activity. Firms are characterized by the absence of the price mechanism.