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The tendency for one party to a bargain to attempt to change the terms in their favour once the other party has committed itself. For example, if a firm has incurred sunk costs in installing equipment to fulfil an order, the customer faces the temptation to try to negotiate a lower price, knowing that the supplier has bought specialized machinery with no alternative use. Equally, the supplier may be tempted to demand a higher price, knowing that the customer has left it too late to find an alternative source. Opportunism can be countered either by stringent and enforceable contracts, or by continuing dealings with the same trading partners, where a reputation for fair dealing is valuable, so that fear of losing it acts as a restraint. See also hold-up.

Subjects: Economics.

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