Arm'S Length Transaction
An arm's length transaction refers to a business deal in which buyers and sellers act independently without one party influencing the other. Arm's length transactions assert that both parties act in their own self-interest and are not subject to pressure from the other party. They also assure others that there is no collusion between the buyer and seller. In the interest of fairness, both parties usually have equal access to information related to the deal.
Autonomy of Transactions
Definition
The autonomy of transactions refers to the independence of buyers and sellers in a transaction, where neither party influences the other. It indicates that both parties prioritize their own interests and are not pressured by the other party. It also assures others that there is no collusion between the buyer and the seller. For fairness, both parties usually have access to information related to the transaction.
Origin
The concept of transaction autonomy originates from free market economic theory, emphasizing the independence and autonomous decision-making ability of market participants. As market economies developed, this concept became widely accepted and applied, particularly in ensuring market fairness and transparency.
Categories and Characteristics
Transaction autonomy can be divided into the following categories:
- Complete Autonomy: Both buyers and sellers act independently without any external intervention or pressure.
- Partial Autonomy: While buyers and sellers act independently in most cases, they may be influenced by external factors in certain specific situations.
Characteristics include:
- Independent Decision-Making: Buyers and sellers make decisions based on their own interests and information.
- Information Transparency: Both parties usually have access to information related to the transaction, ensuring fairness in decision-making.
- No Collusion: Ensures that there is no private collusion between the transaction parties, maintaining market fairness.
Specific Cases
Case One: In the stock market, Investor A and Investor B conduct stock transactions without any external pressure or influence. Both parties make decisions based on publicly available market information and their own analysis, reflecting transaction autonomy.
Case Two: In the real estate market, buyers and sellers conduct property transactions through intermediaries. The intermediaries provide market information and property appraisal reports, and both parties make independent decisions based on this information, ensuring transaction autonomy.
Common Questions
Question One: How to ensure transaction autonomy?
Answer: Ensure information transparency, avoid external intervention, and establish strict market regulatory mechanisms.
Question Two: Does transaction autonomy mean there is no external influence at all?
Answer: Not entirely. While transaction autonomy emphasizes independent decision-making, external factors such as market environment and policy changes can still influence transactions in practice.
