switching costs" become very high for both the supplier
and the buyer. In other words, cancelling the contractual
arrangement could lead to severe losses for both parties.
If the contract was cancelled, the supplier would face
substantial difficulties when attempting to use the firm's
specific assets for other purposes. In a similar vein, it could
be extremely difficult for the buyer to secure a similar
contract with another supplier in the short run, as specific
know-how, both as regards machines and people, would
have been required from this supplier. From the point of
view of the buying firm, the problem of opportunism could
then arise.