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Supply Chain Management: Homework6
Supply Chain Management: Homework6
MURALI
LS1508233
a.
Given that Demand D = 2,000,000 2,000p and the production costs for Orange is $100 per unit
=> a = 2,000,000
b = 2,000
c = 100
We get the optimal price by setting
P* = (2,000,000 + 2,000x100)/4000 =$550
So, Orange should change the wholesale price to $550.
At this wholesale price, for a retailer - Good Buy would set a retail price equal to :
P* = (2,000,000 + 2,000x550)/4000 = $775.
b.
If Orange offers a $40 discount to Good Buy, it mean c of Good Buy = 550 - 40 = $510
Then the new price would be :
(2,000,000 + 2,000 x 510)/4000 = $755
Good Buy would pass along $20 or 50% of the discount offered by Orange.
GANTA.MURALI
LS1508233