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Managerial Economics and Strategy, 2/e
book

Managerial Economics and Strategy, 2/e

by Jeffrey M. Perloff, James A. Brander
February 2016
Beginner to intermediate content levelBeginner to intermediate
500 pages
33h 40m
English
Pearson
Content preview from Managerial Economics and Strategy, 2/e

13.5 Disadvantages of Moving First

Moving first is not always an advantage. We discuss two possible drawbacks to moving first: the holdup problem and acting too quickly.

The Holdup Problem

One of the most serious potential problems with moving first is the holdup problem. It arises when two firms want to contract or trade with each other but one firm must move first by making a specific investment: an investment that it can use only in its transaction with the second firm. A holdup problem arises if two firms agree to work together and the firm that acts second takes advantage of a specific investment made by the firm that acts first. If the firm that acts first does not anticipate this opportunistic behavior by the second firm and it occurs, ...

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Publisher Resources

ISBN: 9780134472553