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The Connotation and Structure of the Concept of Transaction Cost

On 04/10/2014, in Management, by rain

Ever since Coase brought it into Economic analysis in1937, the concept of transaction cost is widely used in Economics. Transaction cost is the Basic concept of New Institutional Economics, and is often used in micro and macro Economics. But it is also a concept full of disputations, the reason of which is that economists in different fields and from different point of view gave transaction cost different concepts and meanings. There are institutional, contractual and property rights explanations of transaction cost. There are also different transaction costs in different field such as market, institution and organization. Not all these conceptions of transaction cost often have the same meaning nevertheless.This main purpose of this paper is try to answer two questions: lWhat exactly is transaction cost?2What does transaction cost contain?By comparing the main conception of transaction cost, this paper brings out a conception of transaction cost which is of all the useful stuff: transaction costs are all the costs occurred to make sure that the transactions can be accomplished effectively, which is composed of institutional costs and true costs. This paper holds the view that the institution can be divided into two parts:institutional rules and organizations. Institutional rules contain formal and informal rules. Organizations contain markets and firms. By structuring transaction costs and informing the connotation of transaction costs, this paper tries to bridge theoretical concepts and true costs.This paper is of five chapters. The fist chapter is “the introduction”. This chapter designs the framework if the whole paper, explains the research background purpose and meanings. The second chapter is “the explanation and comparison of the important concepts of transaction cost”. This chapter introduces the most important concepts of transaction cost advanced by Coase, Arrow, Alchian, Demsatz, Chueng, Williamson, North, Barzel and so on. The third chapter is “the Basic assumptions underneath transaction costs”. The existence of transaction costs means that the traditional assumption of “Economic man” is not appropriate any more and that we need to make new assumptions to adapt to the new circumstances with transaction costs in economic analysis. A new system of assumptions has come to use by generations of economists’hard work, including opportunism behaviour, limited rationality and imperfection information. The fourth chapter is “the structure of transaction cost”. Transaction costs are the costs occurred in using all kinds of institutions, including the cost of using institutions and the “real costs” put forward by Arrow in1965. The institution used in this paper is generalized which means it includes organizations such as market and firm as well as rules such as the law. Institution itself is costly, including the costs of building and maintaining it. Every institution affects human behaviour. Human make their choices to maximize their utility under triple constraints of physics, economy and institution. But institutions do not necessarily increase human utility. On the contrary they often reduce human utility by distorting human behaviours, the reduction of which is named here as distortion costs. This paper divides the costs of using institutions into the costs of the rules, the costs of using markets and the costs of using firms. The costs of the rules include formal and informal rules. The costs of using markets and firms include the costs of building and maintaining them and the distortion costs aroused by them. The real costs of transactions, which could be reduced by using different technology and institution, include the costs of transportation, storage and the time and money spent on transactions. The fifth chapter is “the conclusion”. By the previous discussion this paper concludes that transaction costs are composed of institutional costs and real costs occurred in transactions and are determined by techniques and institution.

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Research of Cost Management of Construction Enterprise Based on Value Chain Theory

On 02/10/2014, in Management, by rain

In China, construction enterprises are in a perfectly competitive industry, the traditionallabor-intensive industries, both to improve Economic efficiency, and improve the quality ofdevelopment, a good cost Management system is essential.This article studies on cost Management of construction enterprises at the view of theperspective of the value chain. First of all, through the vertical and horizontal value chainanalysis outside the Enterprise, the Enterprise was in the middle of the construction industry,from a strategic perspective we studies on the transaction costs and Management of the membersof the inter-Enterprise in Value Chain, we find cost reduction opportunities for all aspects of theexternal value chain in view of lower transaction costs, enhance competitive advantage of theenterprise. Secondly, through the analysis of Enterprise Value Chain, we firstly determine theactivities of project value chain in the whole process, so we analysis the operating levels of thebasis of projects, according to the method of work motivation we operate project costs andreasonable imputation and allocation of the cost of the project calculation more reasonable forthe company’s tender offer follow-up project to provide basis for decision making. Finally, withthe construction company example, the analysis is based on the value chain cost managementsystem in the building business applications; from external transaction costs and the cost of theproject both reduce operating costs, the cost advantage that enterprises enhance their corecompetitiveness.In this paper, the author was in the application of cost management based on value chaintheory in the construction business, from the view of corporate strategy point to in-depth projectlevel within the enterprise, it can be said that the cost management of enterprise conducted acomprehensive study, we hope that through of the analysis of the example, the constructioncompanies can have some help.

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With Transaction Costs the Optimal Consumption and Investment Combination Model

On 19/09/2013, in Management, by rain

Since Magill and Constantinidesde study of the optimal consumption and Investment problem, optimal consumption and Investment problem has been a hot research subject for the financial Economics. How to establish mathematical model to describe the financial market friction and what’s the investors’Investment strategy in such case is a very challenging task. The effect of the Convex analysis methods in a variety of assets with transaction cost investment consumption model research is increasing. Y. Kabanov、C. Kluppelberg have studied stochastic optimal conditions under the restriction of infinite time range, and proved the utility function is defined by a Bellman function is the unique viscosity solution of HJB equation.Y. Kabanov and C. Kluppelberg’s study of optimal investment and consumption is not universal, we study in infinite time range, using optimal control theory and cone geometry consumption, the model is more practical significance. In particular to say, we assume the domain K is closed convex cone、combined value V is a solution of control process and linear equations dVi,t=Vi,t-dYi,t+dθi,t-dCi,t,Vi,0-=xi,i=1,2,…,d C=(ct) is interpreted as consumption process,θ=(θt) is described as the transfer of funds, and the model has m(m≥2) consumers. Morever, we hypothesis utility function u:W→R+is a concave function, which u(0)=0, u(x)/|x|→0,(when|x|→∞).Do the objective function that is the Bellman functionAnd prove J(x) is a unique viscosity solution of a HJB (Hamilton-Jacobi-Bellman)’s Dirchlet problems. So when the total reimbursement values of m consumers isx, through J(x) and dVi,t=Vi,tdYi,t,+dCi,t,we can get the optimal consumption and investment strategyπ=(π1,π2,…,πm).

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The Research on Governmental Governance Structure of Rural Land-purchasing Market

On 10/09/2013, in Agriculture, by rain

The configuration of rural land resource, not only affects the Economic development of a region, but also determines the Social and ecological benefit of a area. If the disposition of rural land resource is not effective, it will cause a series of problems such as the costs of rural land market increasing, food security hiding hazards, Agricultural ecology damaging, landless farmers troubling. Therefore, to study the configuration of rural land-purchasing market of China is not only theoretically meaningful but also practically significant.In the theoretical framework of transaction cost Economics, to research on how to reduce the transaction cost is always through analyzing the selection of governance structure and the arrangement of property rights. Thus, in order to simplify the study, this dissertation divides the governance structure of Chinese rural land-purchasing market into governmental structure and non-governmental structure. In addition, from the perspective of transaction costs, this dissertation constructs an analysis framework of Chinese rural land-purchasing market. Then, it analyzes on governmental transaction costs in the market, from two aspects of transaction attributes and governance framework attributes. On this basis, we propose two fundamental theoretical hypotheses:(1) Under the condition of invariant formal institution, the choice of governance structure follows the decrease of transaction costs.(2) The selection of governmental governance framework in Chinese rural land-purchasing market is influenced by the size and direction of transaction attributes, governance framework attributes, and transaction costs.The data of this dissertation comes from the questionnaire survey in relevant government departments and non-government departments, in Wenjiang district of Chengdu city. The results show that:(1) Tangible asset specificity positively influences on the selection of governmental governance structure. And the current Investment of tangible asset in government department is comparatively small, which needs continued input to diminish corresponding transaction cost.(2) Occupational stability has a positive effect on the choice of governance structure. And the more stable work will lead to the higher work enthusiasm and the less corresponding transaction cost.(3) Integrity positively functions on the selection of governmental governance structure. And the work that needs loyalty and honesty should be finished only by government.(4) Human resources specificity negatively effects on the choice of governmental governance structure. And to decrease the current human resource Investment can successfully cut the corresponding transaction cost.(5) Administrative control has positive effects on the choice of governmental governance structure. And this feature that the government department own has efficiently reduced the corresponding transaction cost.(6) The legal environment positively functions on the choice of governmental governance structure. And to improve the legal system can also diminish the corresponding transaction costs. Additionally, due to collinearity and not significance, variables that are not listed do not get the final test and verify.Finally, according to empirical study, we propose some relative recommendations:(1) Government must strengthen the employees’transaction-cost concept, which can reduce the governmental transaction cost.(2) Government should carefully reform land property rights. If it cannot calculate the transaction costs of the reform, it must cut transaction cost by adjusting the transaction attributes and governance structure attributes.(3) Government should fortify its role in rural land-purchasing market of China.

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Merger and Acquisition of TUV and LGA

On 03/09/2013, in Management, by rain

Under the market economy in China today, the competition between enterprises in various sectors are becoming increasingly fierce. Merger and acquisition is one of most important relationship of business connection. If the merger is successful, then it will make the success for combination of both previous individual companies:reduce the competitors, lower the reset cost and form the scale effect etc. But oppositely, if the merge fail, then it will cause huge increase of the Management fee, make the company fall into a desperate condition which may also cause a lot of negative result:the drop of the Enterprise capability of the previous one, big loose of the staffs, also flare-up the contradiction inside the company. This thesis will tell a real case about TUV Rhineland (shanghai) ltd (named TUV in the below) and LGA (Landesgewerbeanstalt)(named LGA in the below) to compare the difference before and after the merger. And the author will focus on the Management of transaction cost to analysis both before and after and find the different type of transaction cost for different stage and the reason behind. Finally, come to the conclusion that after the merger, the company must focus on integrating corporate culture, adjusting the organization structure, regulating and control the human resource, increasing the Enterprise brand to cut down the high management fee, so as to achieve the effective transfer of assets between the two companies and integration.

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Study on Evolution and Optimization of Raw Milk Production Mode in China Based on the Contractual Relationship

On 01/09/2013, in Agriculture, by rain

Dairy industry is one of the important pillar industries in China’s national economy. Since reformand opening-up, the total output of milk and dairy had continuously increased. Dairy industry graduallybecame a focus in Agricultural development, played an increasingly significant role in some aspects,such as promoting Agricultural structure adjustment, increasing the income of farmers, expandingdomestic demand, stimulating consumption and improving the national physical quality. For Chinesemodern dairy industry started late, from a lower starting point, especially in production of raw milk,because of scattered breeding mode, which brought about inefficiency, slow output growth, and lessquality of dairy products, result in tremendous pressure to dairy processing enterprises. With theproblems above, it is a significant responsibility to study on China’s dairy industry, analysise productionmodes of raw milk, structure of benefits allotment of the interest subjects, then find out the deep-rootedcontradictions and problems, optimize diary industrial structure to keep the industry developing rapidly,healthy, persistently in China.This paper was based on Contract Theory and Game Theory, adopted many research methods, suchas qualitative analysis and comparative analysis, analysised the whole evolution process of raw milkproduce mode, redefined and differentiated the modes of raw milk production through studying oncontractual relationship between benefit subjects and the basis of previous research. The four modes arescattered breeding mode, milk station mode, small regional breeding mode and pasture moede. Thepaper also made an analysis on evolution mechanism of raw milk production. In core of the paper, weanalysised possibilities occurring when benefit subjects playing game, made sure of stability andevolutived direction on raw milk production modes. Finally we inquired into optimization objective andmethods for China’s raw milk production, raised measure of safeguard for optimizing raw milkproduction mode.The results of the study showed that at present in raw production several modes are co-existenceand co-develop, but scattered breeding mode, milk station constitutes a large proportion, which prevententerprising economies of scale, guaranteeing quality and output of raw milk, The lag of productionmode also caused grow speed of raw milk production falling behind process speed of diary enterprises,so that unable to meet the rapid growth of diary demand for consumption. This paper proposes to selecta relatively stable mode which correspond with Chinese actual conditions, to identify a dominant development mode that can develop with other production modes, the paper also provide a reference forraw milk production mode choice and future development in China. The optimization for China’s rawmilk production mode had important realistic meaning for guaranteeing the quantity and quality of rawmilk production, further improving the income of the farmers, promoting the rapid and efficientdevelopment of the rural economy.

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The Research on Internal Audit Outsourcing Theory and Economic Consequences

On 30/08/2013, in Management, by rain

This paper assumes that the internal audit is outsourced to certified public accountants,because many CPA have not the internal audit outsourcing sector. In general, a projectteam will be set after receiving outsourcing, and team members are basically the originalpersonnel engaged in external audit, so the second assumption is that from the originalpersonnel engaged in external audit work to carry out internal audit. Along with theincreasing market competition, enterprises are faced with the uncertainty of operatingenvironment is more and more big, people are increasingly demanding about the functionof internal audit. In this case, the Enterprise or the internal audit department, increasinginvestment, introduce talents, establish perfect internal audit institutions, but the cost willbe high; Either directly have outsourced internal audit certified public accountants andother agencies to perform all or part of the internal audit function instead. In order to savecosts, optimize the structure of Enterprise organization, more and more enterprises tochoose the externalization of internal audit. Internal audit outsourcing in a foreign countryhas been developed greatly, but have much cry and little wool phenomenon, in thedomestic research on internal audit carried out in full, on the one hand, on the other hand,in reality, little choice of internal audit outsourcing companies in the country.In order to reduce transaction costs, and other various costs of setting and operation ofthe internal audit institutions, optimize the allocation of resources, improve internal auditquality and efficiency, it is necessary to further encourage and improve the enterpriseinternal audit in our country the proportion of, before that need to be thorough andsystematic research and demonstrate the possibility and feasibility of internal auditoutsourcing in theory gives the basis of internal audit outside, in addition to the dialecticalview of the advantages of internal audit outsourcing level limitations, objectively analyzethe current rate on the low side of internal audit outsourcing in China, and put forwardcountermeasures accordingly.This paper mainly discusses the necessity of the internal audit outsourcing theory,theory of sufficiency, and the advantages and disadvantages of outsourcing of internal auditand its analysis. From risk Management, under the Management concept of risk-orientedinternal auditing with risk guidance external audit converge this trend, this paperemphatically analyses the adequacy of the internal audit outsourcing theory and advantages.External auditor’s professional competence has carried on the detailed analysis, concludedthat external auditors have stronger professional competence and higher professional skepticism and the deficiency of the internal audit outsourcing, respectively, from theenterprise level, the national government level, the certified public accountants firm levelSuggestions and improvement measures are put forward.

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Research on the Growth of Farmers’ Net Operating Income: an Organized Operation Perspective

On 29/08/2013, in Agriculture, by rain

The issue of “Agriculture, Countryside and Peasants” in China has beenhindering the improvement of agriculture productivity for a very long time, it hasbecome one of the factors that restricted the overall development of socio-economy,balancing development between rural and urban areas and well-off societyconstruction. The central government has already attached great importance to”agriculture, countryside and peasants” problem, although some promising results hasbeen made, but to completely solve the issued, a series of effective and long-termpolicies should be carried out. The core of “agriculture, countryside and peasants”problem is income growth of peasants, which may be the ultimate factor tocompletely solve the “agriculture, countryside and peasants” issue. Only if the incomeof peasants been improved, agriculture can be transformed from tradition to modern,Agricultural structure changed, the rural society been developed, Agricultural economyand countryside economy healthily and continuously developed.There is a large amount of research outcomes on peasants’ income promoting issue, which is mainly focused on the transfer of financial support for agriculture,financial policies, human capital, labor transfer and Agricultural industrialization.Many scholars studied the problem from the composition of the sources of peasants’income; there are also others from operation mode. These results have very importantsignificance in theory and practice. However, scholars studied the problem or fromthe atomic-mode, or from a specific organization, or from some cases. The traditionalunorganized mode of operation is difficult to create profit space, and the factor ofmarket-oriented “organization” is becoming more and more important in the currentperiod. However, in the academic community, the amount of literature related tofarmers’ operating net income growth is relatively small; literature from theperspective of “organized” is even rarer.In recent years, there has appeared a wide variety of agricultural operationorganization based on farmers’ land contract rights. These organizations play a veryimportant role in promoting farmer’s net operation income according to survey. Theparties of the agricultural operation organizations are mainly farmers, enterprises,farmers’ cooperatives, local government, these parties are combined by a series ofcomplex and cross-cutting contracts. Agricultural can efficiently apply newagricultural technologies, realize scale economy and increase the added value of agro-products, and that will create a very broad space for the growth of peasants’ netagricultural operation net income.In this paper,”organization” is taken as a factor in agricultural productionfunction. Then, uses data from the year of2004to2011of all regions in China,proved the income improving effect of “organized operation” from empiricalperspective. At last, proposes some countermeasures for peasants’ benefit protectionunder organized operation frame.This paper includes five chapters:Chapter1, introduction. Describes the research background, a literature reviewand innovation.Chapter2, definition and Basic theory.Chapter3, proposes income promotion mechanism of agricultural organizationaloperating. Part1discusses the general mechanism, part2uses SCP paradigm toanalyze the income promoting performance of different agricultural organizationsChapter4, empirical analysis. Part1is descriptive statistics of farmers’agriculture operation net income; Part2takes “organization” as a factor intoproduction function, using2004-2011regional data related to agricultural Economics;Part3analyzes three examples using SCP. Chapter5, gives some advice to policymakers and agricultural organizations.

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Discussions to Problems n Accounting Principles from Perspective of Transaction Cost

On 09/12/2012, in Management, by rain

【Abstract】 Accounting is one of the branches of Economics and the Basic hypotheses are the same both in Economics and accounting. So better understanding of accounting requires the application of the tools of economics, such as “Transaction Cost Theory”(TCT). From transaction cost perspective the dissertation explains formulation and modification of accounting principles.Transaction cost which is the cost relating to institution is the most Basic and important definition in “New Institutional Economics”(NIE). Changes of transaction cost lead to modifications of institutions. So as one type of institutional arrangement, there are close relations between accounting and transaction cost. From perspective of TCT the author analyzes the birth inbeing and criterion of accounting principles. The points mentioned above pave the way for the author to analyze the modifications of objective formulating institution of accounting principles and accounting regulating system in our country.The author makes numerous empirical and subjective arguments toward the points above, the aim of this essay is establishing a concept: the objective of birth inbeing and modification of accounting principles is to reduce transaction cost. So in order to optimize the allocation of resources, the formulation and modification of accounting principles in our country must follow the rule of reducing the transaction cost.

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Manufacturer’s Decision on Export Patterns

On 08/12/2012, in Trade, by rain

【Abstract】 According to the China commitment to WTO, the system of Foreign Trade Registration will substitute for system of Foreign Trade Approval, and results in foreign trade entry barrier’s reduction. MSE are facing the problem how to decide their export pattern. Product factor, market factor, government factor and involved parties factor, which are derived from transaction cost, are the manufacturer’s main consideration when choosing export pattern from many candidates. Traditional intermediary procurement approach for export has Economics reason. Foreign-trade company can determine orientation of development by investigating various cause of manufacturer’s choosing within many export styles.The thesis consists of four parts: Part I focuses on introduction of different export patterns; part II analyzes composition of export cost; part III makes some insight investigation on manufacturer’s criteria of choosing export pattern; part IV analyzes the opportunity and challenges for foreign trade company.