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Ownership form, managerial, incentives, and the intensity of rivalry

This study investigates how differences in ownership form - between franchised and company-owned units - affect managerial incentives and competitive pricing in different oligopolistic contexts. We argue that chains may restrict decision making in company-owned units as a commitment device to maintain high prices in concentrated markets and found evidence consistent with this argument. We also found that a unit's ownership form affected its rivals' competitive behavior. Our results indicate that company-owned units' ability to raise their own and rivals' prices in highly concentrated markets led to their higher performance relative to franchised units.Printed Journal

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