Transaction cost

In economics, a transaction cost is a cost incurred when making an economic trade when participating in a market.[1]

The idea that transactions form the basis of economic thinking was introduced by the institutional economist John R. Commons in 1931. Oliver E. Williamson's Transaction Cost Economics article, published in 2008,[2] popularized the concept of transaction costs.[3] Douglass C. North argues that institutions, understood as the set of rules in a society, are key in the determination of transaction costs. In this sense, institutions that facilitate low transaction costs can boost economic growth.[4]

Alongside production costs, transaction costs are one of the most significant factors in business operation and management.[5]

  1. ^ Buy-side Use TCA to Measure Execution Performance, FIXGlobal, June 2010
  2. ^ Williamson, O. E., Outsourcing, Transaction Cost Economics and Supply Chain Management, Journal of Supply Chain Management, Volume 44, 2 Apr 2008, pages 2-82, accessed 14 February 2023
  3. ^ Cite error: The named reference :1 was invoked but never defined (see the help page).
  4. ^ North, Douglass C. 1992. "Transaction costs, institutions, and economic performance", San Francisco, CA: ICS Press.
  5. ^ Young, Suzanne (2013). "Transaction Cost Economics". Encyclopedia of Corporate Social Responsibility. Springer Link. pp. 2547–2552. doi:10.1007/978-3-642-28036-8_221. ISBN 978-3-642-28035-1. Retrieved 2020-11-01.