Mental Transaction Cost

2. Explain and give an example of a mental transaction cost.

When individuals debate or decide whether or not to buy a product by looking solely at the price they are performing the thought process called ‘mental transaction cost’. An example of this process would be an online company offering free shipping to your house and if you do not like the product you can return it for free. This concept allows consumers to virtual shop online with ease. It reduces the fear of ‘will I like the quality of this product?’ or ‘did I order the right size?.’ By taking shipping costs out of the equation consumers worry less about the consequences behind the purchase. Personally, I believe many individuals base their purchasing decisions on cost. Thus, this mental transaction cost places the value on a product. At times taking away consumers’ thought process can trouble companies with return sales, and more money spent on unnecessary harmful deliveries.