The Effects of Competition‐Based Public Policy on Contractual Arrangements

When competition is naturally limited, policymakers craft regulation to obtain effects similar to those that would have occurred in the presence of competition. In many instances, regulation of this type is not successful in overcoming market failures. We rely on property rights theory and transaction cost theory to predict when state‐level policy statements will actually lead to a redistribution of benefits at the city level. We test this theory in the context of cable television franchise renewal agreements—a setting historically resistant to competition. We look to the language of the franchise agreements for evidence of concessions made by the cable operator to the city, and using a difference‐in‐difference estimator, we find that pro‐competitive regulation translates into concessions to the city. However, a credible threat of competition embedded in regulation is not enough to curb opportunism associated with monopoly supply in cases of large franchisees; larger cable operators are at least 60 percent less likely to offer more favorable terms of trade. However, consistent with transaction cost predictions, asset‐specific investments by the cable operator do curb opportunism; there is a 51 percent increase in the odds of a franchisee offering more concessions for a 1 standard deviation change—about 1,020 mi of the plant. These findings are important for those involved in crafting policy at all levels of government as well as for researchers interested in understanding the role of long‐term contracting and the use of hybrid mechanisms such as franchise agreements in contemporary governance.     

The Changing Geographies of Power and Control in Rural Service Provision: Recent Restructuring Within the Australian Tractor Dealership System

Over the past few years a considerable body of research has illuminated the changing geographies of service provision in rural Australia. Mostly, this work has emphasised the quantitative aspects of restructuring, by way of documenting numerical reductions in service delivery points and their implications for local employment and service access. In this paper, an examination of recent restructuring within the dealership system for high‐horsepower tractors underlines that these quantitative changes also intersect with qualitative shifts to the character of service delivery. Interviews with 31 participants in the tractor dealership system of Central‐West New South Wales reveal the recent evolution of a producer‐driven supply chain in which two dominant, multinational, tractor‐machinery companies have sought to exercise tighter control over customer relations through the restructuring of franchise agreements with dealers. There has been a resultant demise of the independent dealership, and its replacement by a system of standardised, company‐affiliated outlets operated by franchise holders. Hence, the spatial restructuring of this industry represents the surface manifestations of corporate strategies in which large economic entities are re‐organising their interests in light of globalised theatres of competition and profit. In this sense, the tractor‐dealership system is emblematic of changes to power and control in rural service provision as the franchise models propagated by large corporate interests increasingly subsume the small‐business sector activities of Australia's rural towns.