Problem
Consider a fashion supply consisting a retailer and a manufacturer.
The retailer's pricing and costing information are as follows:
During the summer season, a swimsuit is sold to customers at $125 per unit.
Any swimsuit not sold during the summer season is sold to a discount store for $20.
For the manufacturer, the costs are as follows.
Fixed production cost is $100,000
The variable production cost per unit equals $35
If the retailer and the manufacturer agree on a wholesale contact with the wholesale price of $80 per unit, what will be the retailer's optimal order quantity and the corresponding average profits of the retailer, the manufacturer and the supply chain? Provide the analyses with both approaches and necessary interpretations.