Franchising and Alternative Forms of Contract to Organize Vertical Restraints: Evidence from French Networks

  • Magali Chaudey
  • Muriel Fadario
Part of the Contributions to Management Science book series (MANAGEMENT SC.)


As far as France is concerned, franchising is one of the four types of contracts within networks sharing a same brand name. There is a hierarchy among these four categories of contracts, in accordance with the degree of restriction imposed on the retailer. The aim of this paper is to explain why networks choose franchising contracts, and more precisely why they opt for this degree of vertical integration. Section 2 highlights the relevance of the theory of incentives and the principal-agent paradigm to study franchising, and more generally speaking to study vertical restraints. Furthermore, this section provides an overview of the agency econometrics on franchising. Section 3 develops an econometrical study on French data to test the agency argument in explaining the degree of restriction within vertical contracts. Section 4 contains concluding remarks.


Moral Hazard Vertical Integration Selling Effort Resale Price Maintenance Downstream Firm 


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Copyright information

© Springer-Verlag Berlin Heidelberg 2004

Authors and Affiliations

  • Magali Chaudey
    • 1
  • Muriel Fadario
    • 1
  1. 1.CREUSETUniversité Jean Monnet de Saint-EtienneSaint-Etienne, cédex 2France

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