The main purpose of this article is to establish empirically, using financial data, that there are both ex ante and ex post rents left downstream at McDonald's. We find that the present value of the ex ante rents is around $300K-$455K 1982 dollars. Ex post rents are, of course, even larger. We argue that ex post rents represent an incentive mechanism that complements the use of profit-sharing rights at McDonald's. We also argue that ex ante rents arise here because franchisees' wealth constraints prevent the up-front extraction of the full present value of the ex post rents. Finally, we note McDonald's desire for a particular type of individual to operate its franchises--namely, owner-operators whose livelihoods are tied to the success of their outlets--increases the likelihood that downstream operators face liquidity constraints. This in turn contributes to the need for McDonald's to leave ex ante rents downstream. Copyright 1994 by the University of Chicago.
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Volume (Year): 37 (1994) Issue (Month): 2 (October) Pages: 417-53 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF
Handle: RePEc:ucp:jlawec:v:37:y:1994:i:2:p:417-53
Contact details of provider: Postal: The University of Chicago Press, Journals Division, P.O. Box 37005 Chicago, IL 60637 Fax: (773) 753-0811 Email: Web page: http://www.journals.uchicago.edu/JLE/
For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).
Related research
Keywords:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
repec:bep:glecon:7:2007:4:5 is not listed on IDEAS