Non-contractibility and Market Uncertainty in Franchise Systems

Hidetoshi Shiroishi and Tomokazu Kubo
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Hidetoshi Shiroishi: Keio University
Tomokazu Kubo: Chuo University

No 2012-023, Keio/Kyoto Joint Global COE Discussion Paper Series from Keio/Kyoto Joint Global COE Program

Abstract: Franchisors face a tradeoff between centralization of decision rights and decentralization of decision rights. Regarding the problem, we developed a causal model considering that the relationship between non-contractibility of assets and the allocation of decision rights is not constant, but is contingent on market uncertainty. The results of the analysis showed that a franchise system would be centralized when (1) the franchisor's assets are intangible and are impossible to be transferred by contract, (2) the franchisees' assets are less intangible and are possible to be transferred by contract, and/or (3) the market is uncertain.

Pages: 17 pages
Date: 2012-12
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Persistent link: https://EconPapers.repec.org/RePEc:kei:dpaper:2012-023

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