Double-Sided Externalities and Vertical Contracting : Evidence from European Franchising Data
AbstractThis paper deals with contractual design and vertical relationships within a franchise chain, in the field of the literature on share contracts. Within a double-sided moral hazard, the contract sharing the profit generated by the vertical decentralized structure results from the necessity to incite both the franchisee and the franchisor. This paper takes into account the five franchisor incentive mechanisms in order to study the chosen type of vertical coordination in different contexts. Using a multinational European dataset, we provide evidence that the two-sided externalities and monitoring costs have an influence on the type of vertical coordination in the network
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Date of creation: 17 Apr 2009
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Agency theory; econometrics of contracting; vertical restraints;
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- Sugato Bhattacharyya & Francine Lafontaine, 1995. "Double-Sided Moral Hazard and the Nature of Share Contracts," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 761-781, Winter.
- Gallini, Nancy T & Lutz, Nancy A, 1992. "Dual Distribution and Royalty Fees in Franchising," Journal of Law, Economics and Organization, Oxford University Press, vol. 8(3), pages 471-501, October.
- James A. Brickley, 2002. "Royalty Rates and Upfront Fees in Share Contracts: Evidence from Franchising," Journal of Law, Economics and Organization, Oxford University Press, vol. 18(2), pages 511-535, October.
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