In practice, the cost minimization strategy can be more expensive than the opportunity maximization strategy. Which of the following is a way in which the cost minimization strategy is less expensive than the opportunity minimization strategy?
A) The loss of unexpected opportunities
B) The cost of extensive monitoring mechanisms
C) The costs of writing detailed contracts
D) The prevention of opportunistic behavior by the partner(s)

Question

Quizplus · Accepted Answer

The prevention of opportunistic behavior by the partner(s) is a key advantage of the cost minimization strategy, as it reduces the need for extensive monitoring mechanisms and detailed contracts that can incur significant costs. In contrast, the opportunity maximization strategy may require more investments in monitoring and contractual arrangements to ensure that the partner(s) do not exploit the relationship for their own advantage, which can be more expensive in the long run. However, the cost minimization strategy may also result in the loss of unexpected opportunities that could have generated higher returns, which is a potential disadvantage.

In Practice, the Cost Minimization Strategy Can Be More Expensive