Three key transaction costs are discussed by Williamson[l].
These are the costs of informing traders (information costs),
the costs of reducing bargaining to the terms of trade
(bargaining costs), and the costs of enforcing the terms
of trade (enforcement costs). These are contractual costs
which favour hierarchical organization instead of markets.
The transaction costs would be zero if humans were honest
and possessed unbounded rationality but, if this is not the
case, it becomes important to examine more carefully some
important dimensions of transactions.