QUESTION 3: Suppose that IIQE sells a single kind of cutting edge LCD television to local electronics boutique Deluxe Capacitors (DC). Demand for this television depends on price, such that annual demand is 300,000600p when DC sets a price to its customers of $p per television. Each television costs HQE $400 to produce, and DC pays $CR to HQE for each television it purchases. You may ignore holding and ordering costs in this problem. (a) Suppose that the supply chain participants (HQE and DC) do not coordinate. Determine the optimal values of p and CR that individually maximize profits to DC and HQE. What is the profit to each supply chain participant when the prices are set this way? (b) Suppose that the supply chain participants (HQE and DC) agree to coordinate their efforts to maximize supply chain profit. Determine the optimal value of p that maximizes profit to the entire supply chain. What is the total profit to the entire supply chain when customer price is set this way? (c) Suppose that IIQE would like to offer a volume-based discount to DC that will achieve the coordinated optimum sales quantity. Develop a simple volume-based discount that will achieve this, and explain the conditions that must be satisfied for this discount to be more appealing to both HQE and DC than operating in an uncoordinated fashion. Table 1: Demand and cost data for the televisions sold at Discount Furnishings in Ouestion 1 QUESTION 3: Suppose that IIQE sells a single kind of cutting edge LCD television to local electronics boutique Deluxe Capacitors (DC). Demand for this television depends on price, such that annual demand is 300,000600p when DC sets a price to its customers of $p per television. Each television costs HQE $400 to produce, and DC pays $CR to HQE for each television it purchases. You may ignore holding and ordering costs in this problem. (a) Suppose that the supply chain participants (HQE and DC) do not coordinate. Determine the optimal values of p and CR that individually maximize profits to DC and HQE. What is the profit to each supply chain participant when the prices are set this way? (b) Suppose that the supply chain participants (HQE and DC) agree to coordinate their efforts to maximize supply chain profit. Determine the optimal value of p that maximizes profit to the entire supply chain. What is the total profit to the entire supply chain when customer price is set this way? (c) Suppose that IIQE would like to offer a volume-based discount to DC that will achieve the coordinated optimum sales quantity. Develop a simple volume-based discount that will achieve this, and explain the conditions that must be satisfied for this discount to be more appealing to both HQE and DC than operating in an uncoordinated fashion. Table 1: Demand and cost data for the televisions sold at Discount Furnishings in Ouestion 1
