Which of the following contracts contain vertical restrictions that limit the transacting parties' choices but create economic value?
A)An agreement between firms to jointly invest in research and development.
B)A franchise contract specifying exclusive territory of operation.
C)A contract amongst competitive firms on an uniform pricing strategy.
D)A collusion between two oligopoly firms specifying individual production.

Question

Quizplus · Accepted Answer

The franchise contract specifying exclusive territory of operation limits the franchisee's choice of location and the franchisor's choice of who can operate in a certain area. However, this restriction creates economic value by allowing the franchisee to have a protected market and the franchisor to expand their brand without incurring the cost of opening additional locations. The other options do not involve vertical restrictions that create economic value, as they either involve joint investment or colluding on pricing/production, which can lead to anti-competitive behavior.

Which of the Following Contracts Contain Vertical Restrictions That Limit