Automobiles and beer are typically distributed on behalf of the manufacturer by a distributor that owns the
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Question:
The cost to the manufacturer of distributing automobiles and beer is the discount to the retail price that the manufacturer receives from the distributor. This discount must cover the distributors capital and operating costs.
On the other hand, many fast food restaurant chain outlets are managed by an agent of the company (the manager). The outlet manager's salary is a cost for the fast food chain. The restaurant manager's incentives are set out in her contract and include end-of-year bonuses based on measures of restaurant performance.
(a) What behaviors does equity ownership provide an incentive for that contractual arrangements with outlet managers do not provide?
(b) Why is the incentive provided with equity ownership in part (a) larger for car dealerships and beer distributorships than fast food restaurants?
Related Book For
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts
Posted Date: