Book for reference:

Modern Industrial Organization, by Carlton and Perloff, Addison Wesley, 4th edition.

4. Transaction Cost Economics You work for Ford helping to build a car model for which the cup-holder may either be custom-made or a standardized design. Standard cup-holders are easily available on the after- market. Producing the custom-made cup-holder for this specic car model would require Ford to invest in the development of new molds that would have no value in any alternative use; they are only useful to this one car model. If you, as a car designer, decide to go with the standard model, should Ford make it, or buy it from someone else? If you go with the custom-made cup-holder, should Ford make it, or buy it from someone else? Explain your reasoning, with careful reference to material either in the book, or in the notes