Question

Automated Data Processing (ADP) provides computer software and services to a host of companies, including automobile dealerships. ADP charges dealerships a monthly lease for hardware, software, and support services, but does not charge for training the dealerships’ employees. Dealerships need only pay for their employees’ time and travel to ADP headquarters, where they attend “Software U” at no additional charge.

The time and travel expenses paid by a dealership to train workers is an example of what type of specialized investment? (The part where it mentions the time and travel is throwing me off. Because it's for training the answer should be human capital correct. Or because the expense is going towards the travel and time should the answer be dedicated asset? I think I'm over thinking it.)

Human capital

Dedicated asset

Site specificity

Physical-asset specificity

Is the dealership vulnerable to a "hold-up" problem in this instance? Yes or No

Answer 1

The time and travel expenses paid by a dealership to train workers is an example of what type of specialized investment?

answer is

Human capital

reason : The money the dealership pays to train workers in the form of time and expenses is a specialized investment in human capital

Is the dealership vulnerable to a "hold-up" problem in this instance? Yes

. reason: it faces a potential “hold-up” problem from workers and ADP: If either party decides to sever the relationship, the dealership will have to sink additional funds into training new employee