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

Research output: Contribution to journalArticle

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.

Original languageEnglish (US)
Pages (from-to)191-201
Number of pages11
JournalManagerial and Decision Economics
Volume21
Issue number5
DOIs
StatePublished - Jul 2000

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management
  • Management Science and Operations Research
  • Management of Technology and Innovation

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