By offering the possibility of repeat business,the suppliers and buyers can avoid the problems of opportunism that give rise to transaction costs.

Question

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Repeat business creates a long-term relationship of trust and mutually beneficial outcomes between buyers and suppliers. This reduces the likelihood of opportunism, and hence lowers transaction costs associated with monitoring, negotiation, and enforcement. Therefore, offering the possibility of repeat business can help to mitigate the problems of market failure due to information asymmetry, bounded rationality, and moral hazard.

By Offering the Possibility of Repeat Business,the Suppliers and Buyers