Resource title

A note on franchising and wage bargaining

Resource image

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Resource description

A franchise contract relocates distributable rent between franchisor and franchisee. With decentralized wage bargaining this modifies the position of the union in wage bargaining. If the rent is relocated to the franchisor completely, then even a strong union is not able to raise the wage above reservation level in the franchisee's firm. If franchisor and franchisee negotiate on rent division, there is an incentive to increase franchise fee with the consequence that franchisee's wage is pushed down. Therefore the overall rent assigned to labor depends on the differences of labor intensity in the franchisor's and franchisee's firm. Firm owners may be able to transfer distributable rents from a firm with a strong union to one with a weak union. Additional a franchising contract shows up a first mover advantage. The franchising contract is placed before wage bargaining, benefiting the franchisor. (author's abstract) ; Series: Working Papers Series "Growth and Employment in Europe: Sustainability and Competitiveness"

Resource author

Thomas Grandner

Resource publisher

Resource publish date

Resource language

en

Resource content type

application/pdf

Resource resource URL

http://epub.wu.ac.at/840/1/document.pdf

Resource license

Adapt according to the license agreement. Always reference the original source and author.