Rent sharing in multi-site hog production

A firm-level model of three-site hog production is used to compare a franchise organizational structure to a three-firm alliance. The results of the simulations imply that the franchise system is better equipped to mitigate underproduction in the nursery and finishing units. In the franchise, when underproduction is caused by the breeding, gestation, and farrowing unit, the nursery and finishing units lose relatively more profit than they otherwise would in an alliance. The pig-space guarantee does little to offset the financial risk for the nursery and finishing units when underproduction occurs upstream (breeding, gestation, and farrowing unit).