A manufacturer and a retailer are evaluating to form a supply chain (i.e. to act like a single company). They are currently supplying winter gloves. The manufacturer is producing each pair of winter gloves at $3, and selling each pair to the retailer at $6. The retailer is selling to the customers at $12 per pair. The retailer is philanthropic and donates all unsold winter gloves to a nearby charity home at the end of the season. The customer demand at the retailer is uniformly distributed between 5 and 55. The retailer places only one order per season. Compute the expected profit with and without the supply chain relationship and comment if they should form such a supply chain relationship.
A manufacturer and a retailer are evaluating to form a supply chain (i.e. to act like a single company). They are currently supplying winter gloves. The manufacturer is producing each pair of winter gloves at $3, and selling each pair to the retailer at $6. The retailer is selling to the customers at $12 per pair. The retailer is philanthropic and donates all unsold winter gloves to a nearby charity home at the end of the season. The customer demand at the retailer is uniformly distributed between 5 and 55. The retailer places only one order per season. Compute the expected profit with and without the supply chain relationship and comment if they should form such a supply chain relationship.
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