Spot markets are an INEFFICIENT way for the firm to purchase inputs if:
A) opportunism is a problem.
B) suppliers engage in hold-up.
C) profit sharing is used to compensate managers.
D) opportunism is a problem and suppliers engage in hold-up.

Question

Quizplus · Accepted Answer

Both opportunism and supplier hold-up can lead to higher transaction costs and ultimately lower efficiency in spot market purchases. Therefore, if both problems exist, spot markets are likely to be an inefficient way for the firm to purchase inputs. Profit sharing for managers is not directly related to the efficiency of spot market purchases.

Spot Markets Are an INEFFICIENT Way for the Firm to Purchase