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Using the data, suppose the manufacturer has an inflated demand forecast as follows:
Quantity Probability
2,200 5%
2,300 6%
2,400 10%
2,500 17%
2,600 30%
2,700 17%
2,800 12%
2,900 3%
(a) Suppose the manufacturer is make-to-order (timing of events as in 9(b). Using you contract in Question 9(b)(ii), find the order quantity, and expected profits of the distributor and of the manufacturer. Compare your answer with 9(b)(ii).
(b) Suppose the manufacturer is make-to-stock (timing of events as in 9( c ).using your contract in Question 9 ( c)(ii), find the production quantity, expected profits of the manufacturer and of the distributor. Compare your answer with 9 (c )(ii)
(c) If you are the distributor and you have the choice of revealing the true demand forecast or inflated demand forecast to the manufacturer, what will you do in each case? Explain
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