If Digipics were to agree to spend a significant amount of money to establish a new assembly line for a large client, PicPro, that has unique needs that would make this assembly line largely useless for any other customer, the funds Digipics spent in establishing this line would be an example of
A) forward vertical integration.
B) backward vertical integration.
C) a transaction-specific investment.
D) opportunism.

Question

Quizplus · Accepted Answer

The funds spent by Digipics to establish a new assembly line for PicPro, a client with unique needs, would be an example of a transaction-specific investment. This is because the investment is specific to the needs of PicPro and would not be useful for any other customer, thus making it a risky investment for Digipics.

If Digipics Were to Agree to Spend a Significant Amount