publication . Article . 1990

Improving Channel Coordination Through Franchising

Rajiv Lal;
Open Access
  • Published: 01 Jan 1990 Journal: Marketing Science, volume 9, pages 299-318 (issn: 0732-2399, eissn: 1526-548X, Copyright policy)
  • Publisher: Institute for Operations Research and the Management Sciences (INFORMS)
In this paper, we explore the role of franchising arrangements in improving coordination between channel members. In particular we focus on two elements of the franchising contract, namely, the royalty structure and the monitoring technology. We begin with a simple analysis where a manufacturer distributes its product through a retailer and the retail demand is affected by the retail price and the service provided by the retailer. In this context we show that neither royalty payments nor monitoring are needed for full coordination. We then extend the model to allow for free riding by franchisees and show that although monitoring helps affect the behavior of the ...
free text keywords: Marketing, Business and International Management, franchising, brand name, service, monitoring, moral hazard, Moral hazard, Free riding, Retail sales, Monitoring system, Economics, Channel coordination, Communication channel, Industrial organization, Payment, media_common.quotation_subject, media_common, Incentive
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