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9. The difference in agency efficiency (AA) between other market firms and Keikei Plc as a function of asset specificity (a) is given by the
9. The difference in agency efficiency (AA) between other market firms and Keikei Plc as a function of asset specificity (a) is given by the equation below: = 100 - 20 Similarly, the difference in technical efficiency (AT) between other market firms and Keikei Plc as a function of asset specificity (a) is given by the equation below: AT=- 500 Keep in mind that for both of the above expressions, a positive value means that the market has higher efficiency than Keikei Plc and a negative value means that Keikei Plc has higher efficiency than market firms. a. Keikei is considering to invest in a part of the supply chain with asset specificity a = 2. Calculate the difference in agency efficiency and technical efficiency between Keikei Plc and (5 points) the market firms and give a concise interpretation of your results. b. Should Keikei Plc make this part of the supply chain internally or should it buy it from market firms and why? (10 points) Page 4 of 6
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