It takes me a long time to read, think and understand what the book is talking about. I am still reading the book 'The Economics of Business Enterprise'- Martin Ricketts- Page 16-20. Now i just focus on the meaning of this section: Institutions and information (PART 1: Basic concepts) So that i just have a look on dictionary briefly and have some note-taking what i read.
INSTITUTIONS AND INFORMATION:
FIRMS:
- characterised by a system of bilateral contracts, or 'nexus of contracts' (in more complex case- agreement is signed between employees, bondholders, landowners and a 'legal fiction' such as: BP, US Steel)
- formed as an institutional response to transactions costs.
CONTRACTS:
imperfectly specified, because the lack of specificity abtains from the simple fact that the precise details of the contract is made at the same time when requires the employees of a firm maybe unknown.
INFORMATION:
- collected concerning opportunities for productive collaboration, on the skills and attributes of employees, on new technical innovations, on the demands of consumers
- transmited to the relevant decision-maker who must choose, implement a plan of action.
INSTITUTIONS AND CONTRACT ENFORCEMENT:
THE EXCHANGE GAME:
I found that international trade as the exchange game. That is very simple, interesting although it is not true in practice, but i like the way thw writer wrote. I will explain what is exchange game. Firstly, have a look of this table
The structure of payoffs in a game of exchange:
I supose in the commercial world, there are 2 firms: company A and B. A sells 1 product x, B sells 1 product y. The goods exchange will be happened if A and B sign the contract. In practice, there are 4 cases could be happended:
(a) A and B trust together and cooperate. Each company will get what they want.
(b) A cooperates but B cheats in which A sent his goods x to B before receiving y from B as the B's promise in contract. It means A will receive nothing and lost his goods. So A got -1 goods, B got 1 x and 1 y.
(c) The same case (b)
(d) If A say that please send your goods firstly and then i will send you back my goods. B also say that. Then noone believe each other. It means no comercial exchange.
The reason of these transactions will be explained in next chapters. I am still reading ..
However, to understand that i have to scan these new vocabulary:
- equilibrium method: a condition of balance between oppsed forces
- instantaneous: occuring or completed without perceptible delay
- reconcile: to bring (oneself)) to accept; to make compatible or consistent, reconcile opposing views
--> All transactions are costlessly and instantaneously reconciled.
- gi'gantic: extremely large or extensive, huge
- myriad (a) constituting a very large, identifinite number
(n) a vast number
--> The economy is made up of a myriad of individual contractors, each one in an comprehensive only with painstaking effort, have many complexly arranged elements.
- contractor: one that agrees to perform services at a specified price, especially for construction work
--> contractual (a)
- institution: an established custom, practice or relationship in a society
- firms: a commercial partnership of 2 or more person especially when unincorporated
- rationale: a fundamental reason, rational basic
- sufficient (a) being as much as it needed
- bilateral contracts: contract between 2 sides
- single proprietor: an owner, as of a business, small business
nexus of contracts: a connected services or group, a means of connection, link
- discretion: freedom of action or judgment
--> The choice was left to our considerable discretion.
- collaborate: to work together
--> productive collaboration
- forth (adv) out into view
- implement a plan of action
- decentralise: to cause to withdraw from am area of concentration, to distribute (phan quyen dia phuong)
--> The outcome of entirely decentralised decisions
- conscious decisions of planners: capable of thought, will, perception, deliberate (nhan thuc ro dieu dang xay ra)
- initial characterisation of the firm: su bieu thi dac diem, mo ta tinh cach
- advantage (n)--> advantageous (a) cooperation
- comlementary (a) forming or serving as a complement supplying mutual needs/lacks, addition (su bo sung)
--> complimentary: express a compliment (ca ngoi)
- possession: a territory subject to foreign control
- coalition illustrated: an alliance or union, especially a temporary one (khoi dong minh)
- payoff: a final settlement or reckoning, a bribe
- symmetrical: doi xung
- outcome=result
- dilemma: a situation that requires a choice between options, usually equally unfavourable or mutual exclusive(doc quyen): tien thoai luong nan
- sucker: who is cheated easily
INSTITUTIONS AND INFORMATION:
FIRMS:
- characterised by a system of bilateral contracts, or 'nexus of contracts' (in more complex case- agreement is signed between employees, bondholders, landowners and a 'legal fiction' such as: BP, US Steel)
- formed as an institutional response to transactions costs.
CONTRACTS:
imperfectly specified, because the lack of specificity abtains from the simple fact that the precise details of the contract is made at the same time when requires the employees of a firm maybe unknown.
INFORMATION:
- collected concerning opportunities for productive collaboration, on the skills and attributes of employees, on new technical innovations, on the demands of consumers
- transmited to the relevant decision-maker who must choose, implement a plan of action.
INSTITUTIONS AND CONTRACT ENFORCEMENT:
THE EXCHANGE GAME:
I found that international trade as the exchange game. That is very simple, interesting although it is not true in practice, but i like the way thw writer wrote. I will explain what is exchange game. Firstly, have a look of this table
The structure of payoffs in a game of exchange:
| | Company A | ||
| Cooperate | Cheat | ||
| Company B | Cooperate Cheat | 1,1 (a) 2, -1 (b) | -1,2 (c) 0,0 (d) |
I supose in the commercial world, there are 2 firms: company A and B. A sells 1 product x, B sells 1 product y. The goods exchange will be happened if A and B sign the contract. In practice, there are 4 cases could be happended:
(a) A and B trust together and cooperate. Each company will get what they want.
(b) A cooperates but B cheats in which A sent his goods x to B before receiving y from B as the B's promise in contract. It means A will receive nothing and lost his goods. So A got -1 goods, B got 1 x and 1 y.
(c) The same case (b)
(d) If A say that please send your goods firstly and then i will send you back my goods. B also say that. Then noone believe each other. It means no comercial exchange.
The reason of these transactions will be explained in next chapters. I am still reading ..
However, to understand that i have to scan these new vocabulary:
- equilibrium method: a condition of balance between oppsed forces
- instantaneous: occuring or completed without perceptible delay
- reconcile: to bring (oneself)) to accept; to make compatible or consistent, reconcile opposing views
--> All transactions are costlessly and instantaneously reconciled.
- gi'gantic: extremely large or extensive, huge
- myriad (a) constituting a very large, identifinite number
(n) a vast number
--> The economy is made up of a myriad of individual contractors, each one in an comprehensive only with painstaking effort, have many complexly arranged elements.
- contractor: one that agrees to perform services at a specified price, especially for construction work
--> contractual (a)
- institution: an established custom, practice or relationship in a society
- firms: a commercial partnership of 2 or more person especially when unincorporated
- rationale: a fundamental reason, rational basic
- sufficient (a) being as much as it needed
- bilateral contracts: contract between 2 sides
- single proprietor: an owner, as of a business, small business
nexus of contracts: a connected services or group, a means of connection, link
- discretion: freedom of action or judgment
--> The choice was left to our considerable discretion.
- collaborate: to work together
--> productive collaboration
- forth (adv) out into view
- implement a plan of action
- decentralise: to cause to withdraw from am area of concentration, to distribute (phan quyen dia phuong)
--> The outcome of entirely decentralised decisions
- conscious decisions of planners: capable of thought, will, perception, deliberate (nhan thuc ro dieu dang xay ra)
- initial characterisation of the firm: su bieu thi dac diem, mo ta tinh cach
- advantage (n)--> advantageous (a) cooperation
- comlementary (a) forming or serving as a complement supplying mutual needs/lacks, addition (su bo sung)
--> complimentary: express a compliment (ca ngoi)
- possession: a territory subject to foreign control
- coalition illustrated: an alliance or union, especially a temporary one (khoi dong minh)
- payoff: a final settlement or reckoning, a bribe
- symmetrical: doi xung
- outcome=result
- dilemma: a situation that requires a choice between options, usually equally unfavourable or mutual exclusive(doc quyen): tien thoai luong nan
- sucker: who is cheated easily
