Author Question: In Japan, the market value of the land is approximately four times that of all the land in the ... (Read 56 times)

imowrer · **on:** Jun 30, 2018

In Japan, the market value of the land is approximately four times that of all the land in the United States, even though Japan is only about the size of California. The most likely explanation for this fact is?

Question 2

Explain the three dimensions of uncertainty which affects the choice among markets, contracts, and integration.

Madisongo23 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

There is a greater demand for land in Japan relative to supply than in the United States.

Answer to Question 2

Uncertainty affects the choice among markets, contracts, and integration because the ability to control and shift risk will vary with that choice. At least three dimensions of uncertainty can matter. First is its importancethe choice will vary with the probability of a loss and its expected size. Second are the possibilities for reducing (mitigating) a possible loss, for example, by purchasing insurance or constructing a backup plan with an alternative partner. Third is the dimensionality of the risk. It is relatively easy to write a service contract with liquidated damages for a leased machine that can fail in only one way. If a machine can fail in many ways (and both you and I can take actions that affect the probability of failure), a contract to allocate the repair costs between us may be so costly to write and enforce that vertical integration that puts all responsibility on the owner may be superior.