Franchisee's Service and Franchisor's Royalty Choice

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概要

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• This paper examines two royalty structures when a franchisee's effort induces the demand function to shift upward. Sales-based Royalties (=SBR) is stronger incentive scheme than Margin-based Royalties (=MBS). Double marginalization occurs in Sales-based royalties. Under such circumstance, if the slope of the demand facing the franchisee is less than one, the franchisor charges sales-based royalty to its franchisee. However, if the slope of the demand facing the franshisee is greater than one, the franchisor charges margin-based royalty to its franchisee. We also show that the franchisee's effort level under SBR is always higher than that under MBR, regardless of the slope of the demand.

著者

• 李 東俊

  Faculty Of Management Nagoya University Of Commerce And Business

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