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Optimal method of procuring an input

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Reference no: EM13841728

What is the impact of the following factors on the optimal method of procuring an input.

a. Benefits from specialization.

  • Reduce the benefits of spot exchange.
  • Reduce the benefits of vertical integration.
  • Reduce the benefits of contracts.
  • Increase the benefits of vertical integration.

 

b. Bureaucracy costs.

  • Reduce the benefits of spot exchange.
  • Reduce the benefits of vertical integration.
  • Reduce the benefits of contracts.
  • Increase the benefits of vertical integration.

 

c. Opportunism on either side of the transaction.

  • Lead to less detailed contracts.
  • Lead to the use of spot exchange.
  • Lead to contracts that are more detailed or vertical integration.

d. Specialized investments.

  • Make contracts unattractive.
  • Make spot exchange unattractive.
  • Make vertical integration unattractive.

 

e. Unspecifiable events.

  • Make contracts unattractive.
  • Make vertical integration unattractive.
  • Make spot exchange unattractive.

 

f. Bargaining costs.

  • Lead to longer contracts or vertical integration.
  • Lead to shorter contracts.
  • Lead to spot exchange.

Reference no: EM13841728

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