Retail Contracting: Theory and Practice



We summarize a number of regularities that arise in the empirical literature on contractual relationships between manufacturers and their exclusive resellers. We do this using studies of traditional and business-format-franchise relationships, as well as studies of sales-force-integration decisions. Some of the patterns that we uncover are consistent with a standard incentive-cum-insurance theory of organization, while others are not. We briefly review some theoretical extensions that seem promising in terms of reconciling seeming conflicts between theory and practice.