The manager of a large luxury hotel chain is currently negotiating a four year contract with a linens supplier. The linens company will supply fresh laundered bedding and towels to the hotel over a four year period; however, the hotel chain can ends its contract with the linens company at the end of the first, second, or third years if the linens company does not supply quality linens. What can the manager of the hotel chain do to avoid the end- game problem?
A)Offer a bonus to the linens company if they provide quality linens all four years.
B)Pay the linens company in full after the second year.
C)Pay the linens company in full after the third year.
D)Pay the linens company in full after the first year.

Question

Quizplus · Accepted Answer

Offering a bonus to the linens company if they provide quality linens all four years would incentivize them to maintain consistent quality throughout the entirety of the contract, reducing the likelihood of the hotel chain feeling the need to end the contract early. This solution addresses the end-game problem by creating a stronger incentive for the linens company to continue providing quality products rather than simply relying on the threat of termination. Paying the linens company in full after the second, third, or first year would not address the underlying issue of quality control and could potentially lead to the same end-game problem in subsequent contract years.

The Manager of a Large Luxury Hotel Chain Is Currently