Transaction Costs

What are Transaction Costs?

Transaction costs are all costs incurred in the process and completion of trading. These include all expenses incurred during a business transaction such as legal fees, communication charges or the price of obtaining information.

Transaction costs are not incurred in the production of a product, but in the transfer of goods or services from one economic entity to another. In a broader sense, transaction costs are all those costs that arise in economic life in connection with transactions.

Due to the increase in competition and decrease in market transparency, the consideration of transaction costs has become more important. In fact, the transaction costs are a critical factor when deciding about to either manufacture a product or purchase it.