Long-term contracts can overcome the _____ that sometimes stems from relationship-specific investments, but only if _____.
A)negative profit margin; demand increases
B)lack of competition; barriers to entry are reduced
C)lack of market power; market concentration rises
D)hold-up problem; the contract terms are complete

Question

Quizplus · Accepted Answer

The hold-up problem refers to the risk that one party may exploit the relationship-specific investments made by the other party in a strategic interaction. Long-term contracts can help overcome this problem, but only if the contract terms clearly specify the rights and obligations of each party in a complete and enforceable manner.

Long-Term Contracts Can Overcome the _____ That Sometimes Stems from Relationship-Specific