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)Pay the linens company in full at the end of the third year.
B)Pay the linens company in full at the beginning of the first year.
C)Inform the linens company that the hotel chain will nominate them for a linens industry award if the linens company provides quality linens all four years.
D)Pay the linens company in full after the second year.

Question

Quizplus · Accepted Answer

Informing the linens company that the hotel chain will nominate them for a linens industry award if they provide quality linens all four years incentivizes the supplier to maintain high standards throughout the duration of the contract, addressing the end-game problem by aligning the supplier's interests with the hotel's need for quality over the entire contract period.

The Manager of a Large Luxury Hotel Chain Is Currently