In marketing research, industrial buyer-seller relationships are frequently analyzed by Transaction Cost Economics (TCE). The TCE rationale tends to emphasize the benefits of reduced flexibility in relationships. Institutional safeguards are recommended in order to protect against behavioral uncertainty thereby simultaneously reducing flexibility. Nevertheless, this perspective largely disregards the value of greater flexibility in the presence of environmental uncertainty. Due to environmental change, "better" outside options can emerge requiring flexibility to react. Consequently, a flexibility trade-off emerges when relationships are affected by both behavioral and environmental uncertainty.Ellen Roemer analyzes the flexibility trade-off in buyer-seller relationships. She investigates how relationships should be managed when there is behavioral and environmental uncertainty. TCE, real options analysis, and Austrian economics are used to explore the flexibility trade-off. By extending traditional TCE by real options analysis, an optimum degree of flexibility can be determined.

1 The Necessity of an Analysis of Flexibility in Buyer-Seller Relationships.- 1.1 The Analysis of Buyer-Seller Relationships and the Failure of Transaction Cost Economics in Dynamic Markets.- 1.2 Structure of the Analysis.- 2 A Transaction Cost Economics Explanation of Buyer-Seller Relationships.- 2.1 The Role of Institutions in Society.- 2.2 Transaction Cost Economics.- 2.3 Buyer-Seller Relationships as Hybrid Forms of Governance.- 3 The Analysis of Flexibility in Buyer-Seller Relationships from a Transaction Cost Economics Perspective.- 3.1 Flexibility.- 3.2 The Role of Flexibility in Buyer-Seller Relationships.- 3.3 Flexibility in Transaction Cost Economics.- 3.4 Institutions and Flexibility.- 3.5 Further Problems of the Transaction Cost Economics Framework.- 3.6 The Way Out: Two Perspectives.- 4 Rational Flexibility in Buyer-Seller Relationships - A Real Options Approach.- 4.1 Assumptions of Real Options Analysis.- 4.2 Rational Flexibility and Real Options.- 4.3 Real Options in Buyer-Seller Relationships.- 4.4 (A)Symmetric Relationships and Hold-up.- 4.5 A Model of Rational Flexibility in Buyer-Seller Relationships.- 4.6 Results of an Austrian Approach to Real Flexibility in Buyer-Seller Relationships.- 4.7 Limits of a Real Options Approach to Flexibility in Buyer-Seller Relationships.- 5 Real Flexibility in Buyer-Seller Relationships - An Austrian Economics Perspective.- 5.1 Preliminary Remarks.- 5.2 An Austrian View of Real Flexibility in Buyer-Seller Relationships.- 5.3 Results of an Austrian Approach to Real Flexibility in Buyer-Seller Relationships.- 5.4 Limits of an Austrian Approach to Real Flexibility in Buyer-Seller Relationships.- 6 Conclusions.- 6.1 The Main Results.- 6.2 Promising Avenues for Future Research.- Appendices.- A Some Selected StochasticProcesses.- B Standard Characteristics of Optimal Investment Rules.