Adoption, Transfers and Incentives in a Franchise Network with Positive Externalities

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dc.contributor.authorNault, Barrie R
dc.contributor.authorDexter, Albert S.
dc.date.accessioned2015-05-27T20:02:07Z
dc.date.available2015-05-27T20:02:07Z
dc.date.issued1994
dc.description*INFORMS: unless published under the open access option, the publisher will provide a specific copy of the paper that can be posted to a web page https://www.informs.org/Find-Research-Publications/INFORMS-Journals/Rights-Permissions#work. Article deposited according to Publisher's Policy 05/25/2015en_US
dc.description.abstractFranchising arrangements that allow franchisees with exclusive territories to own their customers are studied. This permits franchisees to benefit from positive externalities in the franchise network through inter-franchise transfers based on the purchases by their customers at other franchises on the network. Using the structure of a single franchisor and many franchisees, its is shown that interfranchise transfers between franchisees and incentives for franchisee investment in the expansion of their customer base are critical both to the size and to the benefits derived from the franchise network. Specifically, it is found that when individual franchisees make investments in marketing effort to increase their customer base, the franchisor's setting of the inter-franchise transfer trades off the positive effects on network size with the negative effects of removing franchisee incentive for investment. This result is due to the fact that inter-franchise transfers encourage investment, use of the royalty and inter-franchise transfer directly dissipates franchisee profits, and indirectly dissipates franchisee profits through less than universal adoption, thereby causing franchisees to under invest. As compared to traditional franchise systems, however, use of the inter-franchise transfer results in franchises making greater investments than they otherwise would.en_US
dc.identifier.citationNault, B.R., and A.S. Dexter, "Adoption, Transfers and Incentives in a Franchise Network with Positive Externalities," Marketing Science, 13, 4 (Fall 1994), 412-423.en_US
dc.identifier.doihttp://dx.doi.org/10.11575/PRISM/28787
dc.identifier.issn07322399
dc.identifier.urihttp://hdl.handle.net/1880/50462
dc.language.isoenen_US
dc.publisherINFORMSen_US
dc.publisher.corporateUniversity of Calgaryen_US
dc.publisher.departmentManagement Information Systemsen_US
dc.publisher.facultyHaskayne School of Businessen_US
dc.publisher.institutionUniversity of Calgaryen_US
dc.subjectStudiesen_US
dc.subjectStatisical analysisen_US
dc.subjectFranchisingen_US
dc.subjectFranchiseesen_US
dc.subjectCustomer relationsen_US
dc.titleAdoption, Transfers and Incentives in a Franchise Network with Positive Externalitiesen_US
dc.typejournal article
thesis.degree.disciplineManagement Information Systemsen_US
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