the choice of organizational form the case of franchising abstract we examine companies that franchise some units and centrally operate own others the agency problems confronting these two organizational forms are analyzed testable hypotheses are developed the empirical results support the notion that owning versus franchising reflects a trade off among agency related problems the cost of monitoring store managers appears to be especially important in the own franchise decision the level of repeat business and initial investment requirements per unit also appear to be important

an institutional analysis of payments for environmental services abstract in this paper the characteristics and functioning of pes is analyzed from an institutional perspective while in theory pes is seen as a market solution to environmental problems as an alternative to state hierarchical and community governance a review of a large amount of case studies shows that pes in practice depends rather fundamentally on state and or community engagement hence pes are foremost a reconfiguration of the roles of public bodies and communities becoming core intermediaries or buyers first to establish pes rights to the land that delivers the environmental service must be clarified this demands public action second transacting over environmental amenities is very costly creating markets for environmental services depends therefore crucially on state and community facilitation hence buyers are often public agencies high transaction costs also influence price setting payments do not follow the market format as intermediaries frequently are setting the price with users often being unaware even of the fact that they pay finally the distinction between payments as incentives and as fair compensations is emphasized while payments may strengthen community relations and simplify action for environmental care they may also introduce a purely instrumental logic and in some cases worsen the environmental status by crowding out environmental virtues for the future greater awareness of these dynamics is warranted

agency theory and franchising some empirical results this article provides an empirical assessment of various agency theoretic explanations for franchising including risk sharing one sided moral hazard and two sided moral hazard the empirical models use proxies for factors such as risk moral hazard and franchisors need for capital to explain both franchisors decisions about the terms of their contracts royalty rates and up front franchise fees and the extent to which they use franchising in this article i exploit several new sources of data on franchising to construct a cross section of 548 franchisors involved in various business activities in the united states in 1986 the data are most consistent with a model based on two sided moral hazard the empirical models are also more successful at explaining the extent to which franchisors choose to franchise stores than at explaining the terms of franchise contracts finally contrary to the predictions of several theoretical models i find that royalty rates and franchise fees are not negatively related

costs of control the source of economic rents for mcdonald s franchisees the main purpose of this article is to establish empirically using financial data that there are both ex ante and ex post rents left downstream at mcdonald s we find that the present value of the ex ante rents is around 300k 455k 1982 dollars ex post rents are of course even larger we argue that the ex post rents represent an incentive mechanism that complements the use of profit sharing rights at mcdonald s we also argue that ex ante rents arise here because franchisees wealth constraints prevent the up front extraction of the full present value of the ex post rents finally we note that mcdonald s desire for a particular type of individual to operate its franchises namely owner operators whose livelihoods are tied to the success of their outlets increases the likelihood that downstream operators face liquidity constraints this in turn contributes to the need for mcdonald s to leave ex ante rents downstream

measuring regional diversification of environmental externalities in agriculture and the effectiveness of their reduction by eu agri environmental programs in poland abstract the problem of externalities is an important aspect of contemporary discussion about the directions of agricultural development and agricultural policy nonetheless measuring agri environmental externalities is a difficult task and rarely undertaken in scientific research in our research we have constructed a synthetic indicator that allows measuring agri environmental externalities at the regional level taking into account both positive and negative effects at the same time we also studied the extent to which our synthetic indicator can be used to inform about the effectiveness of subsidies paid to farmers in the european union under agri environmental programs in reduction of externalities generated by agriculture we concluded that the use of subsidies under agri environmental programs has a positive impact on reducing externalities generated by agricultural production measured by our indicator

cross compliance as payment for public goods understanding eu and us agricultural policies cross compliance cc is a mechanism for encouraging farmers to fulfill certain environmental conditions in return for governmental support payments introduced to united states us and european union eu agricultural policy from the 80s onwards upcoming new us farm bill 2012 and eu common agricultural policy after 2013 policies will include cc cross compliance is seen i as a policy for enforcing environmental objectives or ii as a way to organize and reward agricultural public good production in recent years the instrument s effectiveness and efficiency have been criticized to validate the deviating understandings we drew back on an economic institutionalist perspective we found that regarding eu cc as payment for public goods does not generally align with the existing german property rights distribution in both the eu and us cc standards above those contained regulatory law have characteristics of a payment for public goods but create severe problems we conclude that cc even if useful for triggering and broadening environmental protection efforts may cause several long term problems therefore the rights structure should be clearly communicated law enforcement function should be temporary the instrument should be included in an overall concept and payments should be better linked to the environmental output

multi unit franchising growth and management issues abstract entrepreneurs in a number of retailing sectors have eschewed the creation of company owned chains and have embraced franchising as a preferred method for growing their businesses there have been two leading reasons proposed for this preference first that franchisees provide the financial capital necessary for expansion and second that franchisees manage the outlets better than company employees would if the unit were company owned interestingly although many entrepreneur franchisors confirm the relevance of the capital acquisition argument in their decision making theoretical analysis has discounted its importance instead researchers have focused on the incentives of employee store managers to misrepresent their ability and their effort as the dominant impetus behind franchising misrepresentation by employees as to ability and effort imposes costs and inefficiencies on the entrepreneur s chain arguing that franchising solves these problems by having the stores managed by persons with claims to the profits these researchers have by and large rejected the capital acquisition argument for franchising in favor of this incentive based rationale within this view multi unit franchising presents a curious anomaly multi unit franchising either through the incremental expansion by the franchisee one unit at a time or through the rights to open multiple units contained in an area development agreement creates a collection of mini chains within the franchise system these mini chains are operated by employee store managers of course they are employees of the franchisee but they are employees nonetheless and as franchise researchers have traditionally argued regarding the entrepreneur s employees they will have incentives to misrepresent their ability and effort moreover multi unit franchising is ubiquitous if multi unit franchising is at odds with the incentive rationale for franchising and it has a positive association with the growth of franchise systems it must be providing the entrepreneur with some other benefit in this study we argue that the benefit it provides is access to capital through a study of fast food franchise systems we demonstrate that the more a chain engages in multi unit franchising i e the greater the proportion of multi unit franchisees it has the faster it grows even faster than franchise systems generally moreover we show that the level of commitment franchisors feel toward continuing to franchise is negatively related to the average number of units per franchisee and negatively related to their ability to obtain financial capital elsewhere in other words although multi unit franchising helps an entrepreneur grow his or her business by providing increased access to capital store level incentive problems get increasingly troublesome as franchisees get more and more units it would appear therefore that capital acquisition is a relevant reason for engaging in franchising after all

managerial rents and outside recruitment in the coasian firm in the corporation decision making about the use of capital by managers and risk taking by the owners of capital are specialized activities various institutional mechanisms have been analyzed as forces disciplining the opportunistic behavior of management under these conditions we maintain that no single mechanism such as wage revision in the managerial labor market or an internal device that relies on influencing incentives by making executives residual claimants in the firm is sufficient to solve problems of managerial incentives instead the margins of several control devices are extended simultaneously to maximize the value of the firm net of the cost of control in this context we will emphasize one means of managerial control which has not been fully analyzed to date the impact of outside hiring on the behavior of incumbent managers

the challenge of autonomy and dependence in franchised channels of distribution abstract an enduring challenge for franchise management involves the reconciliation of 1 the franchisor s desire for standardization consistency and control for the preservation of its goodwill and brand equity and 2 the franchisee s quest for autonomy especially because franchises are frequently sold on the platform of be your own boss and have historically attracted would be franchisees with self employment histories and strong streaks of independence and autonomy building on arguments derived from agency theory resource dependence theory the locus of control argument and the countervailing power premise the present study attempts to evaluate 1 the interrelationships between the concepts of autonomy and dependence and 2 the influence of competition success experience and multi unit ownership as determinants of the various autonomy dependence perceptions it is suggested that contrary to the dominant perspective nested in the markets versus hierarchy dichotomy which portrays the sentiments of dependence and autonomy as opposing theoretical variables i e they are envisioned to exist only in high low combinations of these two constructs even their high high and low low combinations can emerge within a franchise setting and that these diverse behavioral settings entail unique management challenges the empirical portion of the study utilizes data drawn from the franchised channel of fastfood restaurants the results support the emergence of all four combinations of dependence and autonomy i e the traditional high low combinations as well as the high high and low low combinations suggesting that behavioral settings of franchises are indeed richer than hitherto imagined it appears that because franchisee franchisor relationships encompass several domains they each feel dependent on the other party in certain domains and simultaneously autonomous in other domains the environmental factor of competition the relationship factor of business success experienced in the franchise system and the structural factor of multi unit ownership emerged as significant predictors of dependence and autonomy notably however the countervailing power argument was not supported by the data the multi unit ownership effects were especially strong and provided a more direct test of the alignment of goals and incentives envisioned by agency theory we conclude by identifying four categories of franchisees with distinct gestalts that franchisors would do well to learn to manage in the spirit of portfolio management

control techniques and upward flow of information in franchising in distant markets conceptualization and preliminary evidence abstract information exchange between franchisees and franchisors is viewed as instrumental for the attainment of both firm specific and systemic goals within franchise systems our study investigates the issue of control and control techniques employed by franchisors to monitor the performance of their franchisees in distant markers with special focus on the role of information exchange a major assumption underlies our work even though in the language of agency theory franchise contracts attempt to align the incentives of the principal i e franchisor and the agent i e franchisee such alignment is not easy to achieve due to basic conflicts in the parties respective goals for instance while franchisees are primarily interested in achieving short term profits franchisors are more concerned about strengthening the brand equity of their systems a perfect upward flow of information i e from franchisees to franchisors therefore is not necessarily guaranteed this paper introduces and empirically evaluates four hypotheses relating franchisees willingness to provide information to their respective franchisors first it is suggested that franchisees willingness to provide information to their franchisors will be positively related to the incidence of repeat purchases since incentives to free ride are expected to be low at such units in repeat customer industries hence franchisees will have little incentive to hide information second it is argued that the greater the age of relationship between the focal franchisee and franchisor the more secure both parties are likely to feel about the projection of this relationship into the future consequently a positive relationship between the age of the franchise relationship and franchisees willingness to provide information to franchisors is proposed next we suggest that the level of competition faced by franchisees is positively related to franchisees willingness to provide information to their franchisors the latter effect is expected for two reasons foremost such franchisees are likely to see the availability of authentic market information as a necessary tool for their franchisors if franchisors are to provide them with accurate localized advice for combating competitive forces second from an agency theory perspective franchisees have an incentive to conceal information about the external environmental factors only if such information serves to explain franchisees business success in terms of forces other than their effort this would not occur in a competitive environment setting finally multi unit franchisees are hypothesized to more willingly provide information to their franchisors than their single unit counterparts given their lower incentives to free ride and the higher level of security felt in their relationships with their franchisors the empirical verification of our contentions was carried out in two stages first we studied in depth the case of lebanon to develop the initial descriptive materials second and based on the first step we surveyed u s based franchisors with franchisees in the middle east and africa to assess our hypotheses results show that while the extent of competition faced by franchisees was found to be an incentive to provide information to franchisors the age of the relationship emerged as a disincentive to sharing information with the franchisors

agricultural policies and trade paths in turkey in 1959 shortly after the european economic community was founded under the 1957 treaty of rome turkey applied for associate membership in the then six member common market by 1963 a path for integrating the economies of turkey and the eventual european union had been mapped as with many trade agreements agriculture posed difficult political hurdles which were never fully cleared even as trade barriers to other sectors were eventually removed and a customs union formed this essay traces the influences the turkey european union economic institutions have had on agricultural policies and the agriculture sector an applied general equilibrium framework is used to provide estimates of what including agriculture under the customs union would mean for the sector and the economy the paper also discusses the implications of fully aligning turkey s agricultural policies with the european union s common agricultural policy as would be required under full membership

an empirical look at franchising as an organizational form franchise contracts are identified as a hybrid form of economic organization motives for the dominance of franchise arrangements are identified by examining the theoretical literature on franchising and related literatures on the theory of the firm firm growth managerial and employee selection a nd brand name capital empirical tests are performed on the incidence of franchise contracts across states for three industries in which f ranchising is prominent and data are readily available the results s uggest that both principal agent incentives and informational incenti ves favor the use of franchise arrangements copyright 1988 by the university of chicago

tie breaks and bid caps in all pay auctions we revisit the complete information all pay auction with bid caps introduced by che and gale 1998 dropping their assumption that tie breaking must be symmetric any choice of tie breaking rule leads to a dierent set of nash equilibria compared to the optimal bid cap of che and gale we obtain that in order to maximize the sum of bids the designer prefers to set a less restrictive bid cap combined with a tie breaking rule which slightly favors the weaker bidder moreover the designer is better o breaking ties deterministically in favor of the weak bidder than symmetrically except when bidding costs are strongly convex jel classication d72 d44

pricing and regulating affect environmental ethics effluent charges and tradeable permits are economically efficient but rarely used a new explanation for this discrepancy is offered pricing may crowd out environmental ethics in the pricing and via spillovers also in non pricing sectors pricing may therefore increase pollution providing a reason why decision makers tend to reject environmental pricing five propositions showing the conditions for counterproductive effects are advanced they are consistent with available empirical evidence regulation by setting standards and subsidies damage environmental ethics less than pricing because pollution is condoned damaging environmental ethics may prevent political action in favor of the environment

improving channel coordination through franchising in this paper we explore the role of franchising arrangements in improving coordination between channel members in particular we focus on two elements of the franchising contract namely the royalty structure and the monitoring technology we begin with a simple analysis where a manufacturer distributes its product through a retailer and the retail demand is affected by the retail price and the service provided by the retailer in this context we show that neither royalty payments nor monitoring are needed for full coordination we then extend the model to allow for free riding by franchisees and show that although monitoring helps affect the behavior of the franchisees royalty payments are still unnecessary to coordinate the activities of the franchisor and the franchisees finally we show that in environments where factors affecting retail sales are controlled by both the franchisor and the franchisee royalty payments provide the necessary incentives for the franchisor while monitoring systems are used to ensure that franchisees also behave in the best interest of the channel our general results are found to be consistent with those in brickley and dark 1987 and norton 1988 who conclude that franchising is affected by principal agent problems our theory finds special support in the work of lafontaine 1988 where it is concluded that the incidence of franchising is related to cost of monitoring and the importance of franchisor investments

property rights regimes and natural resources a conceptual analysis the term common property resource is an example of a term repeatedly used to refer to property owned by a government or by no one it is also used for property owned by a community of resource users such usage leads to confusion in scientific study and policy analysis in this paper we develop a conceptual schema for arraying property rights regimes that distinguishes among diverse bundles of rights ranging from authorized user to claimant to proprietor and to owner we apply this conceptual schema to analyze findings from a variety of empirical settings including the maine lobster industry

agri environmental policies in the eu and united states a comparison abstract agri environmental policies aeps in the united states and the european union are examples of payments for environmental services that pay farmers to reduce the negative externalities of agricultural production while serving as a means to transfer public funds to farmers we show that despite similar origins aeps in the two regions differ both in their specific objectives and in their implementation for example aeps in most member states of the eu 15 have the additional objective of using agriculture as a driver for rural development this objective is achieved by compensating farmers for the private delivery of positive public goods such as attractive landscapes produced by agriculture the rationale is market failure and there is empirical evidence that europeans are willing to pay for such positive externalities no comparable provision exists in u s policy by contrast u s aeps focus almost entirely on reducing agriculture s negative externalities such as soil erosion second we find that u s programs are more targeted than their eu counterparts and take opportunity cost into account the eu programs on the other hand address a wider range of externalities and are focused more on the paying for a particular farming process than reducing specific negative externalities the eu takes a broader view of aeps than does the united states both in terms of type of activity that can be funded and by using less targeting by land characteristics and so the european program could be more easily used as a mechanism for transferring income to producers despite this we find evidence that many of the amenities targeted by the programs are demanded by the population

the economics of franchise contracts as an organizational arrangement the franchise contract lies between anonymous price mediated exchange and centralized intrafirm employment in contrast to conventional market exchange franchise contracts typically impose on franchisees retail quality standards common hours of business price controls and nonlinear payment schedules for example fixed initial royalty fees plus a percentage of gross retail revenues while franchisors typically provide national advertising and training programs monitor and inspect the franchisees performance with varying intensity across industries and hold the residual power to terminate the franchise agreement observations of actual terminations indicate that franchisors sometimes exclude this power franchisors sometimes face persistent queues of potential franchisees in contrast to simple employment contracts franchise agreements provide for sharing of profits through royalties on revenue or output and considerable freedom for independent decisions by local franchisees 1 why do these franchise contracts exist