Dynamic Procurement, Quantity Discounts, and Supply Chain Efficiency
We study a model with a single supplier and a single buyer who interact multiple times before the buyer sells her product in the end-consumer market. We show that when the supplier uses a wholesale price contract, even under perfect foresight, the supplier, the buyer, and the end-consumers benefit from multiple trading opportunities versus a one-shot procurement agreement.
KeywordsAdvance capacity procurement Incremental quantity discounts Strategic interactions Supply chain coordination
The first author was partially supported by NSF Award DMI-0400345 and the second author was supported by NSF Career Award DMII-0093844. The authors would like to express their deepest gratitude to two anonymous reviewers for their constructive comments and suggestions.
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