CONCEPT
Bilateral Dependency
The mutual lock-in created when both parties invest in relationship-specific assets—the structural condition making opportunistic exploitation possible and governance necessary.
Bilateral dependency emerges when both parties to a transaction make investments specific to their relationship, creating mutual lock-in: neither can costlessly
exit because their investments lose value outside the relationship. A supplier builds custom equipment for a single buyer; the buyer integrates the supplier's component into its production line; both are now locked together. The dependency creates vulnerability: each party can threaten to withhold cooperation, knowing the other cannot easily switch. When dependency is symmetric (both equally locked in), mutual vulnerability provides a check on
opportunism. When asymmetric (one party more dependent than the other), the less-dependent party can exploit the more-dependent. Knowledge workers developing AI-platform-specific skills face asymmetric bilateral dependency: the worker's productivity concentrates in one platform relationship while the platform's revenue diversifies across millions.
In The You On AI Field Guide
The governance problem bilateral dependency creates is ex post opportunism: after the relationship-specific investments are made, the competitive discipline that governed initial contracting disappears, and each party has both the incentive and the capacity to behave opportunistically. The supplier can threaten to