Boeing contracted with Vought Aircraft Industries to design and build two sections of the 787's rear fuselage at Charleston, South Carolina.Boeing also contracted with an adjacent joint venture between Vought and Alenia of Italy to assemble fuselage sections.Facing technical and financial difficulties, Vought's owner, the Carlyle Group, refused to increase its investment and instead sought to sell the company.In 2008, Boeing bought Vought's share of the joint venture with Alenia, and then, in July 2009, Boeing bought the Charleston factory from Vought at a cost of $1 billion.(Source:"Boeing's buy of 787 plant will cost $1B, Seattle Times, July 7, 2009.)

(a) Explain the mutual dependence between Boeing and Vought.

(b) Explain Carlyle Group's refusal to increase investment in terms of holdup

(c)The potential for holdup by a subcontractor may lead a manufacturer to contract with two subcontractors, a practice called "second-sourcing."

Explain why second-sourcing may be inefficient in terms of the experience curve.

(d) Suppose that the Carlyle Group had a higher discount rate (shorter time horizon) than Alenia.Would that explain why the Carlyle Group but not

Alenia tried to exit their Boeing contracts?

(e)The Carlyle Group approached various potential buyers.Why would Boeing be willing to pay more than other potential buyers?