Consider a supply chain with the manufacturer, the retailer and end-users, using a revenue-sharing contract with 12% of revenue-shared from the retailer to the supplier, as below cost-benefit & demand forecasting details:F=$120,000 ; c=$30 ; w=$55 ; b=$50 ; p=$122 ; s=$15 ;Demand1,8001,9202,0402,160Probability26%27%29%18%Calculate the retailer’s marginal profit, retailer’s marginal loss, manufacturer’s marginal profit.Calculate the expected profit of the retailer and the manufacturer for 4 above-mentioned demand scenarios. Then, conclude on which production quantity Q to maximize manufacturer’s expected profit, which production quantity Q to maximize retailer’s expected profit.

F = $120000c= $30w = $55b = $50 p = $122s = $14Demand1800192020402160Probability26%27%29%18%

Answered: Consider a supply chain with the…

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter17: Making Decisions With Uncertainty

Section: Chapter Questions

Problem 6MC

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Consider a supply chain with the manufacturer, the retailer and end-users, using a revenue-sharing contract with 12% of revenue-shared from the retailer to the supplier, as below cost-benefit & demand forecasting details:

F=$120,000 ; c=$30 ; w=$55 ; b=$50 ; p=$122 ; s=$15 ;

Demand	1,800	1,920	2,040	2,160
Probability	26%	27%	29%	18%

Calculate the retailer’s marginal profit, retailer’s marginal loss, manufacturer’s marginal profit.
Calculate the expected profit of the retailer and the manufacturer for 4 above-mentioned demand scenarios. Then, conclude on which production quantity Q to maximize manufacturer’s expected profit, which production quantity Q to maximize retailer’s expected profit.

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