BARGAINING, RISK AND FRANCHISING COORDINATION

This article presents a model for analysing the impact of compensation schemes on behaviours of manufacturer and a retailer in a franchising channel. Franchising compensation schemes characterized by the fixed lump sum fees and royalties are discussed by utilizing risk analysis, cross-constrained game theory and bargaining theory. This article expl ores coordinating relationships between the franchiser and the franchi see. It is demonstrated that the franchisee's risk aversion plays an i mportant role in the franchising coordination. Our analyses show that the channel coordination can be achieved utilizing well-known bargaini ng models. A numerical example is provided to illustrate our theoretic al findings. Copyright (C) 1996 Elsevier Science Ltd