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Sustainability 2015, 7(2), 2145-2160; doi:10.3390/su7022145

A Study on Project Duration Incentives in a Retail Apparel Franchise

1
School of Business Administration, Nanjing University of Finance & Economics, Nanjing 210046, China
2
School of Management and Engineering, Nanjing University, Nanjing 210093, China
3
School of Economics and Management, Nanjing Tech University, Nanjing 210009, China
*
Author to whom correspondence should be addressed.
Academic Editors: Tsan-Ming Choi and Yongjian Li
Received: 30 October 2014 / Revised: 10 February 2015 / Accepted: 12 February 2015 / Published: 16 February 2015
(This article belongs to the Special Issue Sustainability in Fashion Business Operations)
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Abstract

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. View Full-Text
Keywords: franchise; apparel branding; clothing branding; project duration incentives; over-confidence; two-way risk franchise; apparel branding; clothing branding; project duration incentives; over-confidence; two-way risk
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Peng, Y.; Zhou, J.; Wu, X. A Study on Project Duration Incentives in a Retail Apparel Franchise. Sustainability 2015, 7, 2145-2160.

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