Blockbuster Inc. is a Newsvendor retailer that purchases products from MGM Studios and sells those to...

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Blockbuster Inc. is a Newsvendor retailer that purchases products from MGM Studios and sells those to customers. Based on Blockbuster's orders, MGM makes production (i.e., pro- duces to order) and ships them to Blockbuster. Customer demand D is uniformly distributed over the interval [0, 20] (remember for a uniformly distributed random variable X U[a, b]. f(x) = and F(x) = - for any x € [a, b]). re MGM's unit cost e is 1. Currently, Blockbuster purchases the products at a wholesale price w = 6 and sells them at p = 16. Now suppose Blockbuster offers a revenue sharing contract where MGM will receive 25% of the revenue but decrease the wholesale price to wr = 3. (a) Find Blockbuster's optimal order quantity under both the wholesale and the revenue- sharing contract. SHOW ALL YOUR WORK. (b) Using the rounded-up numbers from part (a), calculate MGM's expected profits under both contracts. If you were the CEO of MGM Studios, would you accept the revenue-sharing contract? Blockbuster Inc. is a Newsvendor retailer that purchases products from MGM Studios and sells those to customers. Based on Blockbuster's orders, MGM makes production (i.e., pro- duces to order) and ships them to Blockbuster. Customer demand D is uniformly distributed over the interval [0, 20] (remember for a uniformly distributed random variable X U[a, b]. f(x) = and F(x) = - for any x € [a, b]). re MGM's unit cost e is 1. Currently, Blockbuster purchases the products at a wholesale price w = 6 and sells them at p = 16. Now suppose Blockbuster offers a revenue sharing contract where MGM will receive 25% of the revenue but decrease the wholesale price to wr = 3. (a) Find Blockbuster's optimal order quantity under both the wholesale and the revenue- sharing contract. SHOW ALL YOUR WORK. (b) Using the rounded-up numbers from part (a), calculate MGM's expected profits under both contracts. If you were the CEO of MGM Studios, would you accept the revenue-sharing contract?

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