Review the three scenarios below. Look for which, if any, of these scenarios presents an example of post investment holdup.
Your firm conducted a search for a new chief financial officer and hired a highly qualified candidate with a
yearly salary of $250,000. After six months, the person left to join another firm.
Your firm has an exclusive contract to assemble automobile seats for a number of luxury models. Almost 100%
of the materials are imported and, of those, over 50% include parts manufactured in China. All of the prices on
the parts from China increased by 25% when the U.S. imposed tariffs on China. Your company has informed all
of its customers that increased cost must be passed on for your firm to continue supplying the seats. All of your
customers reluctantly agreed to pay the additional cost.
Your company took note of your progress toward your MBA, and when the director for customer services left
the company, you were asked to take over as interim director. You were encouraged to apply for the full-time
position once you got your MBA. You served for 13 months, at which time your company was acquired by
another company and your position was abolished.
Address the following:
Which of the above, if any, are an example of post-investment holdup?
Define the following and explain each within the context of a chosen scenario:
What is the sunk, or stranded, cost?
What is the contract?
Was the contract breached?
What are the damages?
Sample Solution
