Automobile Distribution Research Articles

Contractual Allocation of Decision Rights and Incentives: The Case of Automobile Distribution

We analyze empirically the allocation of rights and monetary incentives in automobile franchise contracts. All of these contracts substantially restrict the decision rights of dealers and grant manufacturers extensive rights to specify and enforce dealers' duties. The allocation of decision rights and incentive intensity differs across brands, however. This variation is explained by the incidence of moral hazard. In particular, when the cost of dealer moral hazard is higher and the risk of manufacturer opportunism is lower, manufacturers hold more rights to determine the performance required from their dealers and to use mechanisms such as monitoring, termination and monetary incentives to ensure that such performance is provided.

Transport network design and mode choice modeling for automobile distribution: A case study

Abstract This paper describes the development and implementation of a mixed integer programming type model designed to determine the best transport mode and rail network location strategy for a leading international automobile manufacturer to supply its North American dealers. In particular, this manufacturer wished to establish a plan for its future vehicle distribution that would determine the best mix of truck, conventional rail and containerized intermodal rail to transport cars and light trucks from its North American plants and ports of entry to its dealers. Further, the manufacturer desired to evaluate the proper number, types and locations of rail terminals required for its distribution network. This paper is intended to provide a perspective on the practical application side of this study and how one can conduct such studies in a condensed time period. Thus, in addition to describing the study problem, results and benefits, we also emphasize such topics as how one can manipulate relatively “user friendly” commercial software to address potentially complex mode choice and location problems.

Power and control in distribution channels: The case of automobile distribution in turkey

Research into the behaviour, management and control of distribution channels has traditionally relied on behavioural frameworks of analysis. Agency theory offers a different but complementary perspective and by integrating behavioural concepts within the framework of agency theory, analytic approaches can be developed which explicitly acknowledge the importance of power within hierarchical relationships. The case of distribution channels for cars in Turkey is used to provide an illustration of the issues relating to power and control within a vertically quasi‐integrated distribution system.

The Economic Effects of Franchise Termination Laws

* We would like to thank Blake Rhodes and Pam Schommer for excellent research assistance, participants in workshops at Arizona State University, University of California, Berkeley, the University of Chicago, Dartmouth College, Iowa State University, the Justice Department, the University of Rochester, and the University of Utah, as well as Jeff Coles, Arnold Cowan, Jim Dana, Franklin M. Fisher, Stuart Gilson, Ben Hermalin, Cliff Holderness, Gregg Jarrell, Alan Krueger, Wayne Mikkelson, Walter Oi, Jim Poterba, Ajai Singh, Cliff Smith, Kathy Spier, David Weisbach, Jamie Zender, Jerry Zimmerman, and, especially, Kevin J. Murphy and an anonymous referee for comments on an earlier draft. Brickley and Weisbach thank the Managerial Economics Research Center of the University of Rochester and the John M. Olin Foundation, and Dark thanks the College of Business at Iowa State University for financial support. Brickley also thanks the Garn Institute of Finance at the University of Utah for financial assistance. 1 See Mark Robichaut, Franchise Rules Are Back Off Drawing Board, Wall St. J., July 6, 1990, at Bl. Note that, in this article, we focus on laws that apply to business-format franchises. For an analysis of state laws in automobile franchising, see Richard L. Smith II, Franchise Regulation: An Economic Analysis of State Restrictions on Automobile Distribution, 25 J. Law & Econ. 125 (1982). Richard A. Epstein, Unconscionability: A Critical Appraisal, 18 J. Law & Econ. 293, 314-15 (1975); and Paul H. Rubin, The Theory of the Firm and the Structure of the Franchise Contract, 21 J. Law & Econ. 223 (1978). Other work on the economics of franchising includes James A. Brickley & Frederick H. Dark, The Choice of Organizational Form: The Case of Franchising, 18 J. Fin. Econ. 401 (1987); James A. Brickley, Frederick H. Dark, & Michael S. Weisbach, An Agency Perspective on Franchising, 20 Fin. Mgmt. (1991, in

The Regional System of Automobile Distribution in Korea

The Regional System of Automobile Distribution in Korea

Perceptions of Interfirm Power and its use within a Franchise Channel of Distribution

Data from a field study of the automobile distribution channel are used to examine how dealers’ perceptions of their manufacturers’ power are related to the latter's use of coercive and noncoercive influence strategies. Dealers’ reports about their manufacturers’ reliance on the various influence strategies also are related to dealers’ attitudes toward their manufacturers and the dealers’ own use of selected influence strategies.

The Development of the Franchise Distribution System in the U.S. Automobile Industry

In this note on the history of automobile distribution methods in the United States, Dr. Marx examines the development of franchised dealerships. He traces the changes in the nature of consumer demand and the growing complexity in relations between manufacturers and their sales force that led to the predominance of the independent dealer franchise in the automobile “distribution channel.”

Franchise Regulation: An Economic Analysis of State Restrictions on Automobile Distribution

FRANCHISE distribution systems are a relatively recent economic development and have proved to be highly effective in industries ranging from hotels to fried chicken restaurants. At the same time, reasons for the economic success and rapid growth of franchise distribution are not well understood.' Misperceptions about the nature of franchising have led to (or at least not prevented) a confusing tide of new regulations and court decisions pertaining to franchising. In particular, government and the courts have vacillated on the legality of territorial security, which is (at least implicitly) a significant aspect of virtually all franchise arrangements. A second key aspect of the franchise system is that it typically involves a relationship between a large corporation and the owner of a small business. In recent years statutes have been enacted which portend to protect the little guy from the rapacious acts of the large and powerful. The interplay between these two concerns is particularly acute in the franchise distribution of new automobiles. Efforts by the states to deal with the issues involved in franchise distribution of automobiles have produced a highly varied collection of regulations. After a brief examination of the economics of automobile franchising, this paper presents an analysis of state regulations of manufacturer-dealer relations in the automobile industry. The analysis provides a basis for an econometric study of the economic impact of the state regulations. Regulations are viewed in the study as producing wealth transfers among the

Constructive Role of Interorganizational Conflict

Conflict between business organizations may have constructive consequences. This article reports on conflict within the automobile distribution system based on a two-year exploratory study, with the relationship between General Motors and its dealers as the primary example. It distinguishes between constructive and destructive conflict by drawing on five premises about intergroup conflict from sociology and applying them to manufacturer-dealer relations. The economic, organizational, and political conditions that encourage a systematic and equitable resolution of conflict are considered.