A study of information cost models in markets and organizations

Studies on the analysis of organization and information have evolved from the application of transaction cost theory. In this theory, judgments have been made on the rationality of the existence of organizations by making comparisons of the information costs in market transactions and those in organizations. Development of information costs within an organization was made by principal-agent theory, however, this was a study to effectively form incentives using contracts and rewards. Agency theory, however, is not a model to analyze the relationship between the quantity of information and costs in organizational structure (in this study, a hierarchical organization). Therefore, there is a need for a model to analyze the scale of an organization and the scale of information that arises from it. In order to achieve this, we have in the past made suggestions and presentations on models showing information costs within organizations. In the current presentation, we attempt to apply this model for cost calculations in market transactions. This model will provide a uniform analysis of information costs in markets and organizations, and will provide an easy method of comparing information costs in markets and in organizations.