A new chain store called ToysToysToys Co. is looking to rent a number of sites for new stores. In addition to wanting to pay the minimum possible rental per site, the company has very particular...

A new chain store called ToysToysToys Co. is looking to rent a number of sites for new stores. In addition to wanting to pay the minimum possible rental per site, the company has very particular requirements that each site must satisfy – a location on a main road and in an area with population concentrations in the company’s target demographic group; the availability of at least 100 car parking spaces; and building space and shape that are suitable for the toy store format. Due to its own lack of expertise, ToysToysToys Co. has decided to hire an external property consultant to locate the sites. The compensation paid to the consultant is to be specified in a contract. a Identify possible sources of asymmetric information in the relationship between ToysToysToys Co. and the external property consultant. b Describe the likely outcome under each of the following types of contracts for the property consultant. How likely are they to achieve the objectives of ToysToysToys Co.? i a fixed fee paid to the consultant for locating a specified number of potential sites ii a fixed fee paid to the consultant for each site found with floor space above a specified level and with rental price below a specified level iii a fixed fee paid to the consultant for each site located which ToysToysToys Co. decides to rent c What type of contract would you recommend to ToysToysToys Co.?