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The extent, motivation, and effect of tying in franchise contracts

✍ Scribed by Steven C Michael

Publisher
John Wiley and Sons
Year
2000
Tongue
English
Weight
87 KB
Volume
21
Category
Article
ISSN
0143-6570

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✦ Synopsis

Abstract

Tying in franchise contracts has been the subject of considerable antitrust litigation and theoretical analysis. Tying can enhance efficiency by increasing standardization and reducing monitoring costs, or it can be used with market power for price discrimination. In this paper, I report on the extent of tying among restaurant franchisors and test whether it is motivated by efficiency or market power considerations. The results show that the use of tying is not affected by market share or outlet share in various industry sectors, but it is affected by equipment required and by business strategy. The results are weakly supportive of efficiency and not supportive of market power. Copyright Β© 2000 John Wiley & Sons, Ltd.

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