In the relationship between steel smelters and steel strip producers, which element dictates the nature of the relationship?
A)The necessity of large mutual transaction-specific investments
B)Pooled resources and competencies
C)Risk-free investments
D)The fact that each is in a monopoly position

Question

Quizplus · Accepted Answer

The necessity of large mutual transaction-specific investments dictates the nature of the relationship between steel smelters and steel strip producers. The production of steel strip requires significant investments in equipment and infrastructure, which is why both parties need to make large, specific investments to make the relationship work. This creates a high degree of interdependence between the two parties, as neither can easily switch to other suppliers or customers.

In the Relationship Between Steel Smelters and Steel Strip Producers