A drawback of short-term contracting as an alternative to making a component in-house is that
A. it fails to allow a long planning period that individual market transactions provide.
B. it is the most-integrated alternative to performing an activity so the principal company has no control over the agent.
C. the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality.
D. the buying firm cannot demand lower prices due to the lack of a competitive bidding process.
Answer: C
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