Free rider problem inolved in hotel industry.
Radisson is an international chain of more than 400 hotels in over 50 countries. Many of the hotels owned & operated by franchises w/ contracts to use the Radisson business format. A franchisee might free ride by compromising on it's own service, while depending on the overall Radison brand to attract customers. To ensure consistent standard through out the chain, each Radisson District Director inspects @ least 1 hotel a week.
(a) Elucidate the negative externality among franchises.
(b) Explain why would a franchise want Radisson to inspect other franchises?
(c) Will the free rider problem be more or less severe in a chain of hotels that are all in a single city as compared w/ an international chain?