Specialized investments:
A) result in relationship-specific exchange.
B) make spot exchange efficient.
C) cause managers to shirk.
D) are equally valuable in any productive use.

Question

Quizplus · Accepted Answer

Specialized investments often lead to relationship-specific exchanges, which are characterized by a high degree of interdependence and uniqueness between the parties involved. This can create challenges if one party wants to switch to a different partner or if issues arise that were not anticipated at the outset. Thus, specialized investments can be difficult to value and transfer, which can hamper the efficiency of spot exchanges. However, when parties have a long-term relationship and make investments that are tailored to their needs, this can create opportunities for mutual gain and value creation that would not be possible with more standardized investments.

Specialized Investments