6. A firm offering translation services for international books in the British market negotiated an
agreement to supply its services to a Danish publishing house. The agreement includes the
translation of 30 books per year, equal to 10,000 pages per year. To increase its capacity and hire
new personnel, the translation services firm should make specific investments for 40,000
euro/year. The price has been negotiated to be 15 euro/page, while the average variable cost to
perform the service is 7 euro/page. If the agreement broke down, the firm could use the
additional capacity and personnel to translate the same number of pages of commercial and
advertising material, which pays a rate of 10 euro/page
(1?)
The quasi-rent is 40,000€/year. There is a risk of hold-up, given the presence of a specific investment
The quasi-rent is 50,000€/year. There is no risk of hold-up, since the company can sell profitably to the
external market
The quasi-rent is 40,000€/year. There is no risk of hold-up, since the company can sell profitably to the
external market
The quasi-rent is 50,000€/year. There is a risk of hold-up, given the presence of a specific investment
