A Theory of Contract Choice with Reference to Petrol Retailing: Risk, Incentives, & Competition

In the UK petrol retailing industry, oil companies have a variety of contracts from which to choose when structuring the organization of their retail networks. Such contracts range from exclusive supply agreements with independent dealers, to various forms of agreement for the operation of companyowned
sites: tenancies, licences, commission agencies, direct management by company employees; franchising has been recently added to this list.’ The purpose of this paper is to formulate a (possible) interpretation for the assignment of such contracts (i.e. to explain the fact that a filling station is operated under one contract-type, rather than another).

By: C. Caffarra