Problem
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?