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Assumed type of
behavior/action
1.
Utility- self-interest orientation: Agents are
self-interest seeking e.g. agents want more of what they like.
2.
Perfect rationality, e.g. the ability of agents to
maximize utility is unlimited.
3.
Risk neutrality.
4.
Preferences are transitive and stable.
5.
Firms maximize profits, e.g. they are perfectly
efficient
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Assumed type of
behavior/action
1.
Utility- self interest orientation: If emphasizing
strategic behavior we may use the terms; opportunism, moral hazard.
2.
Bounded rationality, e.g. the ability of agents to
maximize utility is limited.
3.
Risk
aversion, risk neutrality, or risk lover.
4.
Preferences are unstable (may change fast).
5.
Organizations tend to be efficient rather than
wasteful, Knight [1941, 252].
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Assumed
conditions (case, setting, and economy)
1.
No externalities and exchange is voluntary.
2.
No asset specificity i.e. no quasi rents.
3.
No public goods.
4.
Separability of production.
5.
No connectedness of exchange.
6.
No distortions, e.g. taxes.
7.
Homogeneous goods.
8.
All utility can be measured in pecuniary terms.
9.
No measurement problems.
10.
Perfect information.
11.
Certainty.
12.
No economics of scale and scope.
13.
Time is static or only the dynamic SS is considered.
14.
Human capital can be sold e.g. slavery is legal.
15.
No crime or war and litigation is costless.
16.
Perfect competition (price taking agents).
17.
All property is privately held.
18.
All assets are priced and traded in markets.
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Assumed
conditions (case, setting, and economy)
1.
Externalities and exchange may be involuntary.
2.
Specificity of investment in production.
3.
Public goods (non-exclusion and non-rivalry).
4.
Non-separability of production.
5.
Connectednesses of transactions, e.g. align
capacities, match tolerances, and have components ready on time.
6.
Distortions, e.g. taxes for redistribution.
7.
Heterogeneous goods.
8.
Not all of value can be measured in pecuniary terms.
9.
Measurement problems, e.g. performance.
10.
Imperfect information e.g. asymmetric information.
11.
Uncertainty & complexity of transaction.
12.
Economics of scale and scope.
13.
Dynamic time, e.g. frequency and duration of a
transaction relation.
14.
Human capital is not saleable, e.g. slavery is
forbidden
15.
Crime, war and litigation is costly.
16.
Imperfect competition (price taking- price making).
17.
Not all property is privately held.
18.
Not all assets are priced and/or traded in markets.
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