Tuesday, January 15, 2008
Market Transaction Cost
We talked about the value of firms, which is the present value of the future cash flows. We also talked about the trend of market transaction cost. I did some research on it and here is what I have found:
Transaction cost is a cost that occurs when making an economic exchange. For example, when we sell or buy any stock, there is a transaction cost for this exchange. When we buy or sell a home, there is commission that is based on the value of the property.
The first reason why a transaction cost exists is because it can profit the agency. An agency puts the effort into fully preparing merchandise for the transaction. Transaction cost covers any expenses that may occur.
Transaction cost is also the enforcement for an agreed contract. Transaction cost ensures the parties both follow the terms on the contract. It guarantees the contract to be carried out properly.
http://en.wikipedia.org/wiki/Transaction_cost
Transaction cost is a cost that occurs when making an economic exchange. For example, when we sell or buy any stock, there is a transaction cost for this exchange. When we buy or sell a home, there is commission that is based on the value of the property.
The first reason why a transaction cost exists is because it can profit the agency. An agency puts the effort into fully preparing merchandise for the transaction. Transaction cost covers any expenses that may occur.
Transaction cost is also the enforcement for an agreed contract. Transaction cost ensures the parties both follow the terms on the contract. It guarantees the contract to be carried out properly.
http://en.wikipedia.org/wiki/Transaction_cost
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