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Benetton is studying two alternative contracts with a retailer for a seasonal product, Revenue-Sharing contrcat and Quantity Flexibility contract. Attributes and terms of the
Benetton is studying two alternative contracts with a retailer for a seasonal product, Revenue-Sharing contrcat and Quantity Flexibility contract. Attributes and terms of the two contracts are presented below. Profit Sharing Contrcat: Benetton production cost is $20, and it charges the retailer a low wholesale price of $25. The retailer prices to the customers at $55 per unit. The retailer forecasts demand to be normally distributed, with a mean of 4,000 and standard deviation of 1,600. Any unsold product are discounted to $15, and all sell at this price. The retailer will share 30% of the revenue with Bennetton, keeping 70% for itself.
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