A supplier of metal aluminum serving a Coca-Cola bottler in a large country in Latin America builds a plant along with associated production equipment at an annualized investment cost of $20 million per year. The plant is located directly next to the Coca-

Cola bottler’s bottling factory, which economizes on transportation costs. The marginal cost of producing a can is $0.20 per can. Under a proposed contract, Coca-Cola will pay the supplier $0.50 per can to produce 100 million cans per year. However, if the can supplier does not sell cans to the Coca-Cola bottler, its best available alternative is to sell cans to a Pepsi bottler. The Pepsi bottler would pay the same price for cans that Coca-

Cola would pay and would buy the same number of cans. Even though the Pepsi bottler is the closest bottling operation to Coca-Cola’s, it is located nearly 1,000 miles away, which makes the marginal cost to the can company of selling to Pepsi $0.26 per can.

(a) Is there a relationship-specific investment in this case?

(b) What is the can producer’s rent under the contract with Coca-Cola?

(c) What is the can producer’s quasi-rent?

(d) Suppose the Coca-Cola bottler and the can producer sign a contract at the price of $0.50 per can, but then the Coca-Cola bottler attempts to hold up the can producer. What is the smallest price the can producer would be prepared to accept from the Coca-Cola bottler?

(e) Can the can producer hold up the Coca-Cola bottler in this case?