A Note on the Profit Distribution among a Manufacturer and its Retailers

Naoki Watanabe ()
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Naoki Watanabe: Hitotsubashi University

Economics Bulletin, 2005, vol. 12, issue 16, 1-6

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.

Keywords: bargaining; solution (search for similar items in EconPapers)
JEL-codes: C7 L1 (search for similar items in EconPapers)
Date: 2005-10-03
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