Rational Flexibility in Buyer-Seller Relationships — A Real Options Approach
The aim of this chapter is to model the value of rational flexibility in buyer-seller relationships in order to explain the trade-off in flexibility and to derive implications for the management of buyer-seller relationships in a world of behavioral and environmental uncertainty. Instead of a transaction cost minimizing calculus that is common in TCE, I propose to choose institutions that maximize the value of rational flexibility.
KeywordsReal Option Switching Option Switching Point Geometric Brownian Motion Underlying Asset
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