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Why might transaction costs of locating a replacement clothing item increase with the number of particular features that characterize that item?

Short Answer

Expert verified

Identical replacement involve higher transaction costs

Step by step solution

01

Step1. Introduction

Transaction cost refers to the intermediate costs that might be incurred say when one wants to replace a piece of clothing, as it is given in this particular question.

02

Step2. Explanation

Transaction costs increases with more number of specific features for replacement. This is called identical replacement. As, we need to search more and more which not only is mentally exhaustive, but also takes a lot of time, i.e., it is time taxing. Finding an exact replacement, especially when the number of specific features involved are higher is difficult, and hence involve higher transaction costs. It is specifically so because the higher the number of features, and more specific and particular they are, the exact replacement becomes more and more scarce and hence difficult.

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