Consider the retailer’s position in the quantity flexibility contract problem discussed in the chapter with results in Table 15-6. Consider the base contract in which the order size is 1,000, and the wholesale price is $6. For the following questions, you will need to build a quantity flexibility model. Assume that salvage value is zero for both the retailer and the manufacturer.

a. How much will profit increase for the retailer if increases to 0.5?

b. How much will profit increase for the retailer if increases to 0.5 (keeping at 0.2)?

c. Why would you expect these to be different?