markets

The consumer is the wild card in this scenario. Transaction costs theory requires cost savings that satisfy both parties in the transaction. An Office of Technology Assessment (1994, pp. 30-31) study describes a consumer purchase from a transaction cost perspective:

Consider markets in the context of a consumer buying a high-end stereo system. The buyer mulls over the features that are important--wattage, audio performance, appearance, size, speakers, CD player, tape deck, and cost. There may be hundreds of dealers to choose from. The consumer reads catalogues, compares specifications, consults Consumer Reports, calls for price information, and visits dealers to compare models and prices. The search can take hours, days, or weeks. The time spent in research, comparative shopping, and making the deal are the transaction costs, as are the expense for fuel, wear and tear on the automobile ["as well as the psyche"-- authors' comment], magazine and catalogue purchases, and telephone charges.

The potential changes in the consumer's behavior as he or she takes advantage of the cost opportunities are on such a large scale, and the electronic transaction capabilities currently available so rudimentary, that our understanding of what the consumer will do is, at best, cloudy. There is some evidence that consumers will choose alternative forms of transactions (catalogue and television shopping networks) over retail store transactions, because of price, high quality, selection choice, and time savings considerations.