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| Author: | Dewatripont, M. Sekkat, K. |
| Title: | Producer opportunitism in retailing contracts |
| Journal: | Journal of Industrial Economics
1991 : SEP, VOL. 39:5, p. 595-620 |
| Index terms: | RETAILING CONTRACTS VERTICAL INTEGRATION NEGOTIATION FRANCHISING |
| Language: | eng |
| Abstract: | The issue of producer opportunitism in vertical relationships is addressed. The role of ex post opportunitism on the optimal design of vertical restraints is analyzed. Vertical contracts as starting points of ex post renegotiation are considered. It is shown that the alleged room for franchisor opportunism can be seen as an insurance device when part of the goal of the contract is to provide a stable payoff to the franchise. 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. These results are consistent with the observed tendency to write ex ante contracts. |
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