Transaction costs shape markets in fundamental ways. They are the reason that firms exist, argued Nobel Laureate Ronald Coase; when it is too costly to keep going to the market to buy goods and services, firms bring those functions in-house to allow more efficient coordination.
Lowering transaction costs can even generate additional supply and demand. A transaction cost is a part of the price of a good or service, and often a quite substantial part. And when you lower the price, you make it possible for people to consume more, while suppliers supply more.
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