Virtual Enterprise Transactions: A Cost Model

Abstract

A transaction is a bilateral exchange between two parties in which goods are delivered in return for payment. In virtual enterprise environments, transactions are the principal means of collaboration among the enterprise members, as well as the mechanism with which the enterprise provides its products to its external clients. In this paper we examine the concept of transactions in virtual enterprises. We define transactions as recursive processes (similar to supply chains), and we formalize the concept of transaction cost. We then examine transaction failure and transaction risk, which lead us to the concept of transaction expected loss. The overall goal is to allow enterprise members to launch those transactions that minimize their expected losses. We also discuss how initiating redundant transactions can further reduce expected losses.