The motives for vertical mergers can be seen in the pic. What does the "Cost saving transaction cost paradigm" regard?

There are multiple costs associated with transactions in the market: 1. Monitoring the market 2. Negotiation costs. 3. Search costs, finding the right dealer. 4. Implement contractual obligations 5. File lawsuits (costly) if necessary to complete transactions If TC in market are high, vertical integration might be the better option rather than buying inputs/services on the market. As that provides lower ATC.