Man Ec: #13

Question 1

In transaction costs what does “imperfect commitment” refer to?

Answer 1

Coordination (organizing a transaction) and motivation costs are both above and beyond the dollar price agreed on. Imperfect commitment is when one or both parties to an agreement would later like to abandon the agreement.

Question 2

What is asset specificity?

Answer 2

how much an asset is committed to a specific task and cant be used on another without sacrificing productive value.