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HW #4 (25 pts; Due by Dec. 06)
Problem 1 (10 point): This solve is designed to help you understand various forms of supply dilutes. The spreadsheet wedge contains all the lengthy calculations. You are expected to know how to practice session the worksheets to determine the contract parameters by completing the undermenti geniusd deuce exercises:
* Buy-back Contract
(1) Change the buy-back set and see how the retailers company of magnitude decision will change by completing the following table. Do you see any track?
shapers Buy-back Price| Retailers Optimal Order standard| Retailers Optimal Expected Profit| Manufacturers Expected Profit|
$45| 14000| 497200| 488500|
$50| 14000| 505500| 480200|
$55| 14000| 513800| 471900|
$60| 14000| 522100| 463600|
$65| 16000| 534000| 480500|
The profit would decrease as the buy-back price increases when the order quantity is fixed, and the quantity would increase until utmost one when buy-back price increase to some levels.
(2) Suppose you are the manufacturer (seller), and you would like to induce the buyer by using this contract to purchase the maximum quantity; that is, 18,000 units. What would be the buy-back price you should chap to the buyer? Would this decision agnise sense?
When the buy-back price is to a greater extent than or equal to $75, the buyer would purchase 18,000 units because the buyer could gather the largest profit in 18,000 units compared with other quantities.
This decision doesnt make sense, because the manufacture should focus on the profit, and his goal is to maximize the profit. From the trend analyzed above, the profit would decrease as the buy-back price increases when the order quantity is fixed, so to induce the buyer to purchase the maximum quantity, the manufacture would only get no more than 440,500, which is trustworthy when the...If you want to get a full essay, order it on our website: Ordercustompaper.com
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