Price Control In Franchised Chains: The Case Of McDonald's Dollar Menu
AbstractWe analyze price patterns at franchised and corporate-owned McDonald's outlets in 1999 and 2006 and find that prices at franchised outlets were higher than those at corporate outlets. The price difference between franchised and corporate outlets decreased between 1999 and 2006 but only for items with close substitutes in the Dollar Menu, which was introduced in 2002. We also find that the price difference between franchised and corporate outlets was higher among outlets located near highways than among non-highway locations. After the Dollar Menu was introduced, this highway - non-highway difference diminished. Our findings suggest that the Dollar Menu improved McDonald's corporation's control over franchisees' prices.
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Bibliographic InfoPaper provided by Ben-Gurion University of the Negev, Department of Economics in its series Working Papers with number 1206.
Length: 35 pages
Date of creation: 2012
Date of revision:
Franchising; Free-Riding; Reputation; Advertising; Vertical Restraints;
Find related papers by JEL classification:
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
- K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
- M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising
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- Toivanen, O. & Waterson, M., 2001.
"Market Structure and Entry: Where's the Beef?,"
The Warwick Economics Research Paper Series (TWERPS)
593, University of Warwick, Department of Economics.
- G.F. Mathewson & R.A. Winter, 1984. "An Economic Theory of Vertical Restraints," RAND Journal of Economics, The RAND Corporation, vol. 15(1), pages 27-38, Spring.
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