In the real world, virtually all purchases involve some type of specialized investment. For instance, by driving to a particular supermarket, you invest time (and gasoline) that is valuable to you only if you purchase groceries at that supermarket. Why, then, don’t consumers sign contracts with supermarkets to prevent the supermarkets from engaging in opportunism once they are inside the store?

In the real world, virtually all purchases involve some type of specialized investment. For instance, by driving to a particular supermarket, you invest time (and gasoline) that is valuable to you only if you purchase groceries at that supermarket. Why, then, don’t consumers sign contracts with supermarkets to prevent the supermarkets from engaging in opportunism once they are inside the store?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter21: Getting Employees To Work In The Firm’s Best Interests

Section: Chapter Questions

Problem 10MC

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