Volume-Based Quantity Discounts

Design a volume-based discount scheme that gets the retailer to purchase and sell the quantity sold when the two stages coordinate their actions

Lessons from Discounting Schemes

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Quantity discounts play a role in supply chain coordination and improved supply chain profits

Discount schemes that are optimal are volume based and not lot size based unless the manufacturer has large fixed costs associated with each lot

Even in the presence of large fixed costs for the manufacturer, a two-part tariff or volume-based discount, with the manufacturer passing on some of the fixed cost to the retailer, optimally coordinates the supply chain and maximizes profits



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