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Naoki Watanabe
''A Note on the Profit Distribution among a Manufacturer and its Retailers''
( 2005, Vol. 12 No.16 )
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
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
Manuscript Received : Sep 27 2005 Manuscript Accepted : Oct 03 2005

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