Specific assets can create problems for a company.If a supplier invests in new machinery to deliver a part useful only to its biggest and best customer,it can find itself with:
A)a low cost delivery output.
B)a holdup problem.
C)significant externalities.
D)an outsourcing dilemma.

Question

Quizplus · Accepted Answer

The scenario described in the question is a classic example of the holdup problem. The supplier has invested in machinery that is useful only to its biggest and best customer. As a result, it becomes dependent on this customer and may have less bargaining power in negotiations. The customer may exploit this situation and demand lower prices or other concessions, leading to a holdup problem for the supplier.

Specific Assets Can Create Problems for a Company