Which of the following is not a result of the holdup problem?
A)More difficult contract negotiations and more frequent renegotiations
B)Investments to improve ex post bargaining positions
C)Reduction in the transaction costs of arm's length market exchanges
D)Distrust
E)Reduced investment in relationship-specific investments

Question

Quizplus · Accepted Answer

The holdup problem occurs because parties to an agreement have made relationship-specific investments that are not valuable outside of that specific agreement. This creates a situation where one party can hold up the other party for a larger share of the gains from trade. The result of the holdup problem includes more difficult contract negotiations, more frequent renegotiations, investments to improve ex post bargaining positions, distrust, and reduced investment in relationship-specific investments. However, reduction in the transaction costs of arm's length market exchanges is not a result of the holdup problem.

Which of the Following Is Not a Result of the Holdup