New Institutional Economics is a field of economics which expands the neoclassical concept. Its main representatives are Ronald Coase and Oliver Williamson. In 1937 Ronald Coase describes the firm as a result of relationships which arise when the role of the market is undertaken by the manager-entrepreneur.

Market failures represent the inability of the market to allocate resources optimally. In the absence of transaction costs optimal allocation would be at the Pareto optimum, that is, where supply and demand meet.