1-Buyback contracts counter double marginalization by lowering the cost of under

Question

1-Buyback contracts counter double marginalization by lowering the cost of understocking for the retailer.

A) True B) False

2-To reduce lot sizes managers must take actions that helps reduce the fixed cost associated with ordering, transporting, and receiving each lot

A) True B) False

3-Lot size based quantity discounts reduce the bullwhip effect within the supply chain.

A) True B) False

4-The lack of coordination hurts both responsiveness and cost in supply chain by making it more expensive to provide a given level of product availability

A) True B) False

Explanation / Answer

1- The correct answer is true.

Buyback contract is the contract between buyer and vendor where the vendor repurchase the goods from the buyer due to certain circumstance within the time period. The price is specified in the contract. Double marginalization occurs when market power is exercised at vertical layer of supply chain successively. So, buy-back contract deals with double marginalization by lowering the cost of understocking.

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