Asked by Maestro Frotty on Sep 24, 2024
Verified
What are some of the solutions for a hold-up problem?
A) Mergers
B) Contracts
C) Exchange of 'hostages'
D) All the above
Hold-Up Problem
Arises in business and negotiation when one party has the opportunity to exploit the other in a contractual agreement, often after making a relationship-specific investment.
Mergers
The combination of two or more companies into one, with the aim of achieving synergies such as higher efficiency or market share.
Contracts
legally binding agreements between two or more parties that outline terms and conditions of a specific transaction or relationship.
- Gain proficiency in the concept of hold-up problems in business operations and effectively apply solutions.
Verified Answer
TD
Tweet Dotson5 days ago
Final Answer :
D
Explanation :
All the options listed are recognized solutions for mitigating hold-up problems. Mergers can internalize transactions, contracts can specify actions in various states of the world, and the exchange of 'hostages' can ensure commitment from parties involved.
Learning Objectives
- Gain proficiency in the concept of hold-up problems in business operations and effectively apply solutions.