Question
Recall the in-class exercise with the sunglasses supply chain. Zamatia, the manufacturer, sells high-end sunglasses to UV, the retailer. We learned that Zamatia can use
Recall the in-class exercise with the sunglasses supply chain. Zamatia, the manufacturer, sells high-end sunglasses to UV, the retailer. We learned that Zamatia can use a buy-back contract to incentivize UV to order the supply-chain optimal quantity. However, an assumption implicit in the exercise was that both Zamatia and UV had the same demand forecast (i.e., the same distribution for demand). Question 3 (10 pts.). What will happen to the effectiveness of a buy-back contract if the manufac- turer's forecast of demand is higher than the retailer's forecast? How might a retailer use this to their advantage?
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