A Study on Project Duration Incentives in a Retail Apparel Franchise

Sustainability

Yichen Peng¹  Jing Zhou³  Xiaoling Wu³  Tsan-Ming Choi² 

[1] School of Business Administration, Nanjing University of Finance & Economics, Nanjing 210046, China;id="af1-sustainability-07-02145">1School of Business Administration, Nanjing University of Finance & Economics, Nanjing 210046, Chi;School of Management and Engineering, Nanjing University, Nanjing 210093, China; E-Mails:

关键词: franchise;    apparel branding;    clothing branding;    project duration incentives;    over-confidence;    two-way risk;   

DOI  :  10.3390/su7022145

来源: mdpi

【 摘 要 】

This paper studies the impact on project duration of different forms of over-confidence among general contractors executing such projects, in the context of retail apparel franchises. It goes on to consider the design of relevant incentives and, in particular, a compensation mechanism included in the initial contract that covers the event of contractor dismissal. This mechanism is examined as a means of hedging risk arising from the behavior of the principal. This includes a study of a two-way risk avoidance strategy, which is intended to make up for a shortfall in this regard in the existing literature. Outcomes derived from this research include the conclusion that different levels of confidence can have various impacts on optimal incentive coefficients and the effort level extracted from agents, thereby affecting the ultimate configuration of an optimal contract. Introducing a compensation mechanism covering the event of dismissal can serve to diminish the risk of an agent breaching their contract. This paper applies the concept of bounded rationality to a principal-agent model, ensuring conclusions that are attuned to reality.

【 授权许可】

CC BY   
© 2015 by the authors; licensee MDPI, Basel, Switzerland.