Consider a manufacturer which depends on a monopoly supplier of some essential input. Why should the manufacturer consider producing the input in-house?

Question

Quizplus · Accepted Answer

The potential for holdup is a significant concern when a manufacturer depends on a monopoly supplier for an essential input. The supplier might exploit its monopoly position to impose unfavorable terms, prices, or even threaten to cut off supply, leaving the manufacturer vulnerable. Producing the input in-house can mitigate this risk by reducing dependency on the external supplier.

Consider a Manufacturer Which Depends on a Monopoly Supplier of Some