Question: A supplier whose production cost $2 per unit sells to a retailer at a wholesale price of $5 per unit. The retailer purchases products in
A supplier whose production cost $2 per unit sells to a retailer at a wholesale price of $5 per unit. The retailer purchases products in anticipation of a random demand whose forecast is given below. The retailer resells them at a price of $10 per unit. Further, unsold items cannot be salvaged.
| Possible demand realizations | Probability |
|---|---|
| 1 | 0.1 |
| 2 | 0.1 |
| 3 | 0.1 |
| 4 | 0.1 |
| 5 | 0.1 |
| 6 | 0.1 |
| 7 | 0.1 |
| 8 | 0.1 |
| 9 | 0.1 |
| 10 | 0.1 |
Q1. suppose the retailer buys 5 units from the supplier, what is the retailer's expected profit?
Q2. Suppose the retailer buys 5 units from the supplier, what is the retailer's expected profit.
Q3.How many units will the retailer buy from the supplier under this wholesale price contract (at the wholesale price of $15)
Q4. What is the profit the supply chain would have achieved if it were centralized i.e: what is the first-best profit for the supply chain?
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