A relationship-specific exchange occurs when:
A) a partnership is dissolved.
B) specialized investments are important.
C) a partnership is initiated.
D) shareholders receive dividends.

Question

Quizplus · Accepted Answer

A relationship-specific exchange refers to a situation where specialized investments are made by one or both parties in a relationship. These investments are tailored to the specific relationship and cannot be easily transferred to another partner. Examples of such investments include specialized equipment, training, and infrastructure. Hence, option B is the correct answer. Option A is incorrect because partner dissolution is a result of many factors and not necessarily related to a specific type of exchange. Option C is incorrect because partnership initiation can be based on other types of exchanges such as arms-length transactions. Option D is also incorrect because shareholders receiving dividends is a result of general exchange relationships between shareholders and the company, which is not necessarily relationship-specific.

A Relationship-Specific Exchange Occurs When