Question
Dunkin' Donuts stores are independently owned by franchisees while Starbucks owns a majority of its stores which are run by salaried store managers. Which of
Dunkin' Donuts stores are independently owned by franchisees while Starbucks owns a majority of its stores which are run by salaried store managers. Which of the following does this imply?
a. Dunkin' Donuts likely invests more money into monitoring the performance of franchisees than Starbucks invests in monitoring its own store managers.
b. On average, the total compensation of a Starbucks store manager should be about equal to that of a Dunkin' Donuts franchisee.
c. Dunkin' Donuts faces a greater moral hazard problem than Starbucks.
d. Starbucks faces a greater adverse selection problem than Dunkin' Donuts.
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