50 points] You make special anniversary edition of YU T-shirts and sell them to the YU bookstore for $13 per T-shirt. Each T-shirt costs you $10 to produce. The bookstore charges $15 per T-shirt. Assume holding costs are $0. Also, any T-shirt not sold at the end of the semester is donated to Goodwill. Past sales statistics indicate the demand for T-shirts each semester is as follows:
Demand 50 100 150 200 250 300
Probability 10% 20% 25% 25% 15% 5%
a) (20 points) How many T-shirts will the YU bookstore (acting independently and optimally) stock? What is your profit? What is the YU bookstore’s profit?
b) (30 points) You remember from your OM class at Sy Syms that by offering a “buy-back contract” you can induce YU bookstore to order more because you will buy back unsold T-shirts from YU bookstore which if done correctly will coordinate the channel or the supply chain in other words it will maximize the total profit in the supply chain. What is the channel coordinating buy-back price that you should offer to YU bookstore? What is your profit? What is the bookstore’s profit?
2. [25 points] A flight has 91 seats left. The full-fare tickets are priced at $600 and the discount tickets are priced at $350. The airline estimates that the demand of full fare customers is between 51 and 100, all numbers equally likely. How many seats should the airline reserve for the full fare class?
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