Coordinating order quantities between the manufacturer and the buyer: A generalized newsvendor model

Abstract A generalized newsvendor model is developed to analyze the coordinated quantity decisions between the manufacturer and the buyer. The manufacturer and the buyer operate to meet random demand of one product with a short lifecycle. The analytical results for the general newsvendor model are obtained. Our analysis of the generalized newsvendor model developed yields the insights into the coordination structure between the manufacturer and the buyer. Quantity discount policies are developed as incentive policies, which the manufacturer may use to induce the buyer to order the coordinated quantity.

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