Transaction costs are additional costs on incurs during the buying and selling process of a commodity. When one is buying a commodity, we usually have other costs apart from the cost of a commodity that adds up to the price of a good. Transactions costs can be in financial terms like commissions or brokers fees; inconvenience made when selling or buying a good as well as extra time.
How transaction costs reduce the number of trade
Transaction costs reduce trade in various ways; it, first of all, increases the costs of economic transactions, thus making it expensive for people to trade as the total costs adds with additional expenses to be incurred by the participating parties. When the cost of a commodity goes up, consumers will try yo act in a rational manner, and definitely, the trade will reduce the product involved.
How eBay has reduced transaction cost
With the online platform being accessed easily, the transaction cost for intermediaries has been reduced or eliminated completely thus reducing transaction costs.