Transaction costs and the nature of information

Abstract

In this paper we suggest a framework to interpret the transaction costs concept. We consider transaction costs as the resource losses due to imperfect information. We relate the concept of transaction costs to the nature of information. According to the information set it belongs to, an information may be redundant or complementary. As a consequence, transaction costs will
be different. We have applied this notion of transaction costs to the credit market taking into account the nature of information. We consider a large population of borrowers and lenders who, matching randomly, may or may not incur information costs. These costs may have a positive effect on the probability of success of the project. We emphasize that upon the nature of information, the lenders as the borrowers may behave strategically in order to minimize the transaction cost losses.

JEL Classification: D80, D89, LI4, G21