Benefits from specialization.
a. The benefits of specialization are intended to have a positive impact on the optimal method of procuring an input. The effect of specialization will lead to procurement of best quality inputs at the most cost effective possible way. Thus, benefits of specialization will also provide a comparative advantage to the procurement of inputs.
b. Bureaucracy costs. Bureaucracy costs will make the method of procuring of input to be more time-consuming, dependent on many external factors and thus make it contingent on factors and unreliable. Due to bureaucratic concerns, the costs of input procurement may also rise and there will be a wastage in terms of time, money and efforts directed towards the procurement.
c. Opportunism on either side of the transaction. Ans: The opportunism on either side of the transaction may lead to unjustifiable profits or benefits to one of the parties. However, this will make the input procurement difficult and slacken the relation of trade between the two parties. Thus the optimal method will get affected in terms of the efficiency of work rendered and in many cases, this may also lead to the cancellation of the contract when one party continues its opportunistic behavior against the other party for a considerable time.
d. Specialized investments