Transaction Cost
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With the rapid growth of a new economy called the “Shared or P2P Economy”, this new type of economy is roughly $15 Billion in 2014 and estimated to reach up to $335 Billion by 2025. These new type of economies under cuts the traditional business that provide services for the following and much more:Companies like Uber (Taxi Services)Airbnb (Hotel Services)TaskRabbit (Chores Services)In Chicago, the following situation has happened:It seems there had been a thriving market in the limited number of medallions, but the entrance of UBER broke the monopoly power of these licenses, crushing their value. In April 2014, thirteen medallions were sold in Chicago, for an average price of $342,150. In July 2015, only one medallion sold — for a price of $150,000. And when I contacted the largest medallion broker in the city, he said he currently has 11 medallions for sale at an offering price of $150,000 — but no one is willing to bid for them, and he hasnt even received a lowball bid!The new share economy is allocating resources that once were idle, reallocating those same resources, and creating a new market for it. Companies at the end of the day want to reduce transaction cost. This is because a consumer will only purchase something if the benefit outweigh the cost, both the monetary cost and the transaction costs. With a lower transaction cost, more people should be able to purchase their good, or the firm can charge a higher price, or both. Size of Sharing Economy:[pic 1]
Growth Rates by Sector:[pic 2]TWhere do we go from Here? The new economies that are classified Share economy will also provide better and more exciting services.The Future is coming!