P 125 Demand scenario - each retailer 8000 10000 12000 14000

W 80 Probability 11% 11% 28% 22%

S 20
VC 35 Decentralized
Order quant. for each retailer
8000 $360,000 $360,000 $360,000 $360,000
9000 $300,000 $405,000 $405,000 $405,000
10000 $240,000 $450,000 $450,000 $450,000
11000 $180,000 $390,000 $495,000 $495,000
12000 $120,000 $330,000 $540,000 $540,000
13000 $60,000 $270,000 $480,000 $585,000
14000 $0 $210,000 $420,000 $630,000
15000 -$60,000 $150,000 $360,000 $570,000
16000 -$120,000 $90,000 $300,000 $510,000
17000 -$180,000 $30,000 $240,000 $450,000
18000 -$240,000 -$30,000 $180,000 $390,000
19000 -$300,000 -$90,000 $120,000 $330,000

Retailer 1's demand scenario

Centralized - Joint probability 8000 10000 12000 14000
8000 1.21% 1.21% 3.08% 2.42%
10000 1.21% 1.21% 3.08% 2.42%
Retailer 2's 12000 3.08% 3.08% 7.84% 6.16%
demand
scenario 14000 2.42% 2.42% 6.16% 4.84%
16000 1.98% 1.98% 5.04% 3.96%
18000 1.10% 1.10% 2.80% 2.20%

Order quant. for the system (R1+R2)

16,000 $720,000 $720,000 $720,000 $720,000
18,000 $600,000 $810,000 $810,000 $810,000
20,000 $480,000 $690,000 $900,000 $900,000
22,000 $360,000 $570,000 $780,000 $990,000
24,000 $240,000 $450,000 $660,000 $870,000
26,000 $120,000 $330,000 $540,000 $750,000
28,000 $0 $210,000 $420,000 $630,000
30,000 -$120,000 $90,000 $300,000 $510,000
32,000 -$240,000 -$30,000 $180,000 $390,000
34,000 -$360,000 -$150,000 $60,000 $270,000
36,000 -$480,000 -$270,000 -$60,000 $150,000
 16000 18000
18% 10%

Expected profit Manufacturer's profit System's profit

$360,000 $360,000 $360,000
$405,000 $405,000 $393,450
$450,000 $450,000 $426,900
$495,000 $495,000 $448,800 manu.profit syst. Profit
$540,000 $540,000 $470,700 $1,080,000 $2,021,400
$585,000 $585,000 $463,200
$630,000 $630,000 $455,700
$675,000 $675,000 $425,100
$720,000 $720,000 $394,500
$660,000 $765,000 $345,000
$600,000 $810,000 $295,500
$540,000 $750,000 $235,500

enario both retaliers

16000 18000 Centralized system's deman 16000 18000 20000
1.98% 1.10% Acc joint Probability 1.21% 2.42% 7.37%
1.98% 1.10%
5.04% 2.80%
3.96% 2.20%
3.24% 1.80%
1.80% 1.00%

$720,000 $720,000 $720,000 $720,000 $720,000 $720,000 $720,000

$810,000 $810,000 $810,000 $810,000 $810,000 $810,000 $810,000
$900,000 $900,000 $900,000 $900,000 $900,000 $900,000 $900,000
$990,000 $990,000 $990,000 $990,000 $990,000 $990,000 $990,000
$1,080,000 $1,080,000 $1,080,000 $1,080,000 $1,080,000 $1,080,000 $1,080,000
$960,000 $1,170,000 $1,170,000 $1,170,000 $1,170,000 $1,170,000 $1,170,000
$840,000 $1,050,000 $1,260,000 $1,260,000 $1,260,000 $1,260,000 $1,260,000
$720,000 $930,000 $1,140,000 $1,350,000 $1,350,000 $1,350,000 $1,350,000
$600,000 $810,000 $1,020,000 $1,230,000 $1,440,000 $1,440,000 $1,440,000
$480,000 $690,000 $900,000 $1,110,000 $1,320,000 $1,530,000 $1,530,000
$360,000 $570,000 $780,000 $990,000 $1,200,000 $1,410,000 $1,620,000
 22000 24000 26000 28000 30000 32000 34000 36000
11.00% 16.64% 18.48% 17.12% 13.52% 7.64% 3.60% 1.00%

Ex. R. profit
$720,000
$807,459
$889,836
$956,736
$1,000,536 manu.profit syst. Profit
$1,009,392 $1,170,000 $2,170,536 $504,696
$979,440
$913,536
$819,240
$708,900
$591,000
 production cost 18
Whole sales price 43
Selling price 68
salvage cost 13

Decentralize

Order quantity 9000 10000 11000 12000 13000 14000

1000 45 45 45 45 45 45
2000 90 90 90 90 90 90
3000 135 135 135 135 135 135
4000 180 180 180 180 180 180
5000 225 225 225 225 225 225
6000 270 270 270 270 270 270
7000 315 315 315 315 315 315
8000 360 360 360 360 360 360
9000 405 405 405 405 405 405
10000 345 450 450 450 450 450
11000 285 390 495 495 495 495
12000 225 330 435 540 540 540
 Demand Probabilistic
25 manu. Profit 9,000 10%
25 retailer profit 10,000 20%
30 lost sale 11,000 28%
12,000 14%
13,000 13%
14,000 15%

Retailer Average 500

profit (in
Order quantity Thousands) Manu's profit 450
1000 45 45
2000 90 90 400
3000 135 135
4000 180 180 350
5000 225 225
6000 270 270 300
7000 315 315
8000 360 360 250
9000 405 405
10000 439.5 450 200
11000 453 495
150
12000 437.1 540 4000 6000 80
6000 8000 10000 12000 14000 16000