| Summary: | 博士 === 國立臺灣科技大學 === 管理研究所企業管理學程 === 88 === This paper attempts to investigate what an optimal compensation scheme for the franchising contract should be in order to induce higher or low level of effort from franchisee. The key assumption in this paper is that the extent of effort of franchisee can not be observed by franchiser but can be inferred from the franchisee’s sales volume. We concluded that franchisee’s payment should depend on its sales volume if the franchiser expects franchisee to put high effort. Besides, the incentive pay should be more intensive if (1) the difference between the disutilities of franchisee high effort and low effort is getting larger, or (2) the disturbing factors in sales volume become more influential. And furthermore, if there is no hidden action or the franchiser wants the franchisee take low effort, the optimal compensation is fix wage.
This paper shows the optimal compensation scheme should be relative to the franchisee’s performance, which was ignored by previous paper.
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