Q. What are the costs included in transaction costs?

i. Search and information costs:

It is related to the cost that is involved in locating and evaluating the right supplier.

ii. Bargaining and contracting costs:

It is related to the costs that affirm incurs when it negotiates the terms and conditions to prepare a contract which ensures that the supplier

delivers the goods and services according to the terms and conditions of the contract.

iii. Policing and enforcement costs:

It relates to cost incurred when firms constantly monitor the suppliers to ensure that the terms and conditions of the contract are adhered to.

iv. Cost incurred because of loss of control:

Employing market mechanisms can lead to underinvestment in relationship- specific assets which increases the cost of buyers.