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Producer opportunism in retailing contracts

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  • Mathias Dewatripont
  • Khalid Sekkat

Abstract

This paper analyzes the role of ex post producer opportunism on the optimal design of vertical restraints. It considers vertical contracts as starting points of ex post renegotiation. It shows that the alleged room for franchisor opportunism that seems quite important in franchising contracts can be seen as an insurance device when part of the goal of the contract is to provide a stable payoff to the franchisee. This conclusion holds for various opportunistic strategies: direct eviction of initial retailers, excessive entry of new retailers on the market, or resale price maintenance used to encourage "voluntary" exit of initial retailers. Copyright 1991 by Blackwell Publishing Ltd.
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Suggested Citation

  • Mathias Dewatripont & Khalid Sekkat, 1991. "Producer opportunism in retailing contracts," ULB Institutional Repository 2013/7320, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:ulb:ulbeco:2013/7320
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    Cited by:

    1. Affuso, L., 2000. "Intra-Firm Retail Contracting: Survey Evidence from the UK'," Cambridge Working Papers in Economics 0022, Faculty of Economics, University of Cambridge.
    2. Lømo, Teis Lunde, 2015. "Risk sharing mitigates opportunism in vertical contracting," Working Papers in Economics 10/15, University of Bergen, Department of Economics.
    3. Tom Murphy & Greg Walker & John Hicks, 1996. "Promoting Efficiency and Competition in Rural Petrol Markets," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 3(4), pages 441-448.
    4. Phan, Phillip H. & Butler, John E. & Lee, Soo H., 1996. "Crossing mother: Entrepreneur-franchisees' attempts to reduce franchisor influence," Journal of Business Venturing, Elsevier, vol. 11(5), pages 379-402, September.

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