Real Flexibility in Buyer-Seller Relationships — An Austrian Economics Perspective

Abstract

The results of the previous chapter have been deduced under very strict assumptions, especially concerning the rationality of agents. In a real options world, economic agents are able to anticipate a complete set of future states of the world, to grasp the hold-up problem, to foresee a trade-off in (rational) flexibility, and to choose appropriate safeguards. Empirical evidence has shown, however, that agents are not necessarily as rational as depicted in most neoclassical models (Colinsk 1996, 670–672). Consequently, we have to suspect that different insights will result from an analysis of flexibility in buyer-seller relationships if we relax the assumption of rationality.