Imagine your company has to hire 20 new entry level employees. Experience suggests that you will receive 1000 applications for the open position. You also expect about 5 of those you do hire will "not measure up" at the 3 month mark.

In this context, what are the transaction costs? Why do these costs arise? Why are transaction costs likely to increase exponentially if your firm needs to fill 200, or 500 open positions of varying levels of seniority?

Imagine your firm establishes a relationship to a small number of universities. Your firm comes to rely on the candidates recommended by the placement office of these chosen universities. In return, these Universities find future students for their graduate and specialized programs from within firms such as yours.

How does this quasi strategic alliance help reduce the transaction costs for your firm? What underlying reasons are there for these transaction costs to decline?