The assignment is to identify the key characteristics of TCE. Analyse the vertical boundaries of a firm by describing the critical role played by coordination in a vertical chain. Use the issue tree in Figure 5.4 pp144 of Besanko as a guide to your reply. Objective of the Assignment The objective of the Assignment is to understand and apply the following concepts: firm v market, TCE, make-or-buy dilemma, vertical boundaries of the firm, vertical chain. The focus is on the evolution of the firm. The materials begin by introducing transactions cost economics (TCE), which argues that firms are important when contracts are incomplete, and firms make large specific investments. Firms are complex, a ?nexus of contracts? where management take the view that vertical integration is useful for assuring input supply in an uncertain world. However coordination can be a problem in vertical chains yet management need to obtain economies of scale and size in production in order to be profitable. A critical task for management is to define the boundaries of the firm by determining what to make and what to buy.