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Franchise fee, competition and economic growth

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  • Wang, Vey
  • Lai, Chung-Hui

Abstract

This paper introduces the different kinds of franchise contract bargaining into a macroeconomic model and accordingly researches the relationship between competition and economic growth. In Nash bargaining model/vertical integration we find an inverted-U shaped or a monotonically increasing relationship between the competitive degree of the intermediate goods market and economic growth. In bargaining of the right to manage model/vertical non-integration our result shows an inverted-U shaped or a monotonically decreasing relationship between the competitive degree of the intermediate goods market and economic growth. In addition, there is an overall negative relationship between the competitive degree of the final goods market and economic growth. Especially, our interesting findings that the pricing rule for intermediate goods firm depends not only on market power but also bargaining power are more general. Therefore, we can further explain the firms' vertical control strategy.

Suggested Citation

  • Wang, Vey & Lai, Chung-Hui, 2011. "Franchise fee, competition and economic growth," Economic Modelling, Elsevier, vol. 28(5), pages 2090-2099, September.
    • Handle: RePEc:eee:ecmode:v:28:y:2011:i:5:p:2090-2099
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    Cited by:

    1. Philippe Aghion & Rachel Griffith & Peter Howitt, 2006. "Vertical Integration and Competition," American Economic Review, American Economic Association, vol. 96(2), pages 97-102, May.
    2. S. Nageeb Ali & David A. Miller, 2020. "Communication and Cooperation in Markets," Papers 2005.09839, arXiv.org.
    3. Karakoç, Gülen & Pagnozzi, Marco & Piccolo, Salvatore, 2022. "The value of transparency in dynamic contracting with entry," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    4. Bo Yan & Yanping Liu & Si Liu, 2023. "Corporate social responsibility in long‐term supply chain management," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 17-27, January.
    5. Chung-Hui Lai, 2015. "Effects of Intellectual Property Rights Protection and Integration on Economic Growth and Welfare," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 11(2), pages 143-162, July.
    6. Kim, Stephen K. & Tiwana, Amrit, 2022. "Franchising contracts as routines: Untangling the adaptive value of incomplete contracts," Journal of Business Research, Elsevier, vol. 152(C), pages 177-190.

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