Question

When asset specificity is very high and there is market uncertainty, then it is best for a firm to:

a. Vertically integrate.
b. Ngage in a strategic alliance.
c. Use a short-term contract.
d. Buy in the open market.

Answer 1

a. Vertically integrate.

Explanation:

a. Vertically integrate as this is the only way to reach the standards requirements of the product features at the reasonable amount.

Therefore according to the given situation, If the specificity of the assets is very high and there is market instability so it is appropriate for a company to vertical intergrate.

So, the correct answer is a.