A note on the profit distribution among a manufacturer and its retailers

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Abstract

Examining two polar forms of restricted franchise contract, Nariu (2004) studied the pricing behavior of manufacturers and retailers and the market outcomes. This note provides a concise justification for his assumptions on contractual restraints. Introducing some fixed amount that a manufacturer must invest to build up its production facility, we show that a bargaining solution to distribute the total net profit among a manufacturer and its exclusive retailers assigns zero franchise fee payment to any retailers, if the investment is not large.

Original languageEnglish
JournalEconomics Bulletin
Volume12
Issue number1
Publication statusPublished - 2005 Dec 1
Externally publishedYes

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ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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