The basic unit of analysis of transaction cost economics
is the transaction laid down in a contract between two
trading parties. According to the transactional view, a
transaction can take place in the institutional framework
of the market (using the price mechanism), or of a hierarchy
(which requires a co-ordination of efforts) — i.e. whatever
allows it to be executed most efficiently. It is assumed that
the most efficient mode, for a particular kind of transaction,
will prevail.